Question

Bond J has a coupon rate of 5.3 percent. Bond S has a coupon rate of 15.3 percent. Both bonds have eleven years to maturity, make semiannual payments, and have a YTM of 11.6 percent. Requirement 1: If interest rates suddenly rise by 3 percent, what is the percentage change in the price of these bonds? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) Percentage change in price Bond J % Bond S % Requirement 2: If interest rates suddenly fall by 3 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Percentage change in price Bond J % Bond S %

Answer 1

	Bond J	Bond S
n	22	22
PMT	26.5	76.5
YTM	0.116	0.116
PV	$   614.00	$   1,226.70
rise 3%	$   498.20	$   1,037.77
%change	-18.86%	-15.40%
fall 3%	$   768.25	$   1,470.52
%change	25.12%	19.88%