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Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent

Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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**Problem 7-19 Interest Rate Risk [LO2]** Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. a. **If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave?** *(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)* - Bond Sam: ____ % - Bond Dave: ____ % b. **If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave?** *(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)* - Bond Sam: ____ % - Bond Dave: ____ % **Diagram Explanation:** The diagram below these questions consists of a simple table with four lines, each corresponding to two sections (a and b) for Bond Sam and Bond Dave. It is formatted as follows: - a. Bond Sam ____ % - a. Bond Dave ____ % - b. Bond Sam ____ % - b. Bond Dave ____ % The diagram does not contain any numerical data or additional instructions but indicates where the answers should be entered.
Transcribed Image Text:**Problem 7-19 Interest Rate Risk [LO2]** Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. a. **If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave?** *(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)* - Bond Sam: ____ % - Bond Dave: ____ % b. **If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave?** *(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)* - Bond Sam: ____ % - Bond Dave: ____ % **Diagram Explanation:** The diagram below these questions consists of a simple table with four lines, each corresponding to two sections (a and b) for Bond Sam and Bond Dave. It is formatted as follows: - a. Bond Sam ____ % - a. Bond Dave ____ % - b. Bond Sam ____ % - b. Bond Dave ____ % The diagram does not contain any numerical data or additional instructions but indicates where the answers should be entered.
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