Question

1. Are bond prices are equally sensitive to the same percentage increases or decreases of the market interest rate (YTM)? Explain and use an example of: Market interest rate increases, say, from 5% to 6% and decreases from 5% to 4%).

2A Explain the impact of coupon amounts (example use: $30 coupon vs. $$85 coupon) on the interest rate sensitivity of a bond.

2B if the market interest rate changes, which bond's price will change more, the one with the low or high coupon? (assuming other things are identical.) Explain why?

Answer 1