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Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %

Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %
Transcribed Image Text:Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %
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