Question

Bond J has a coupon rate of 5.4 percent. Bond K has a coupon rate of 15.4 percent. Both bonds have twelve years to maturity, a par value of $1,000, and a YTM of 11.8 percent, and both make semiannual payments.

a.	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.)
b.	If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1