Both Bond Bill and Bond Ted have 11 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20 years to maturity. Both bonds have a par value of 1,000. 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 rates were to suddenly fall by 2 percent Instead, what would be the percentage change in the price of these bonds? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Bond Bill Bond Ted a. Percentage change in price % 96
Both Bond Bill and Bond Ted have 11 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20 years to maturity. Both bonds have a par value of 1,000. 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 rates were to suddenly fall by 2 percent Instead, what would be the percentage change in the price of these bonds? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Bond Bill Bond Ted a. Percentage change in price % 96
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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need help on both questions, thank you
Transcribed Image Text:Both Bond Bill and Bond Ted have 11 percent coupons, make semiannual payments, and
are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20
years to maturity. Both bonds have a par value of 1,000.
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 rates were to suddenly fall by 2 percent Instead, what would be the percentage
change in the price of these bonds? (Do not round Intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Bond Bill
Bond Ted
a. Percentage change in price
b. Percentage change in price
96
96
96
96
Transcribed Image Text:Bond J has a coupon rate of 4.9 percent. Bond K has a coupon rate of 14.9 percent. Both
bonds have twelve years to maturity, a par value of $1,000, and a YTM of 10.8 percent,
and both make semiannual payments.
a. If Interest rates suddenly rise by 3 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 3 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.)
a. Percentage change in price
b. Percentage change in price
Bond J
Bond K
96
%
96
%
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