Problem 6-20 Interest Rate Risk [LO 2] Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity, a par value of $1,000, and a YTM of 10.6 percent, and both make semiannual payments. Remember, price change equals (ending price - beginning price) / beginning price or ending price/beginning price - 1. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: 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. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J Bond K % % % %
Problem 6-20 Interest Rate Risk [LO 2] Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity, a par value of $1,000, and a YTM of 10.6 percent, and both make semiannual payments. Remember, price change equals (ending price - beginning price) / beginning price or ending price/beginning price - 1. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: 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. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J Bond K % % % %
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 6-20 Interest Rate Risk [LO 2]
Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity, a par
value of $1,000, and a YTM of 10.6 percent, and both make semiannual payments. Remember, price change equals (ending price -
beginning price) / beginning price or ending price/beginning price - 1.
a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?
Note: 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.
b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
a. Percentage change in price
b. Percentage change in price
Bond J
Bond K
%
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F58fb1050-0ac2-40db-9180-20882ad4c971%2Ff96101c7-35aa-45ca-a348-4b9b8940f30d%2F9ke4waa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 6-20 Interest Rate Risk [LO 2]
Bond J has a coupon rate of 4.8 percent. Bond K has a coupon rate of 14.8 percent. Both bonds have eleven years to maturity, a par
value of $1,000, and a YTM of 10.6 percent, and both make semiannual payments. Remember, price change equals (ending price -
beginning price) / beginning price or ending price/beginning price - 1.
a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?
Note: 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.
b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
a. Percentage change in price
b. Percentage change in price
Bond J
Bond K
%
%
%
%
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