Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has 14 years to maturity. 
If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Sam?  
If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Dave?  
If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Sam be then? 

If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Dave be then? 

a)
Bond Sam:
If rates suddenly increase by 4%, the new YTM will be = 9% + 4% =13%
Then current price of bond is:
=PV(13%/2,2*2,90/2,1000)
=931.48
Change in price =931.481000/1000 = 6.85
Bond Dave:
If rates suddenly increase by 4%, the new YTM will be = 9% + 4% =13%
Then current price of bond is:
=PV(13%/2,9*2,90/2,1000)
=791.35
Change in price =791.351000/1000 = 20.86%
b)
Bond Sam:
If rates suddenly fall by 4%, the new YTM will be = 9%  4% =5%
Then current price of bond is:
=PV(5%/2,2*2,90/2,1000)
=1075.24
Change in price =1075.241000/1000 = 7.52%
Bond Dave:
Then the current price of the bond is:
=PV(5%/2,14*2,90/2,1000)
=1399.30
Change in price =1399.301000/1000 = 39.93%
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