Bond J has a coupon rate of 4 percent and Bond K has a coupon rate of 10 percent. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 7 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change 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. What if rates suddenly fall by 2 percent instead? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 3216)

Bond J has a coupon rate of 4 percent and Bond K has a coupon rate of 10 percent. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 7 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change 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. What if rates suddenly fall by 2 percent instead? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 3216)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter16: Capital Structure Decisions

Section: Chapter Questions

Problem 10MC: Suppose there is a large probability that L will default on its debt. For the purpose of this...

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