Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. 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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %
Problem 8-18 Interest Rate Risk Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. Bond Sam bond has five years to maturity, whereas the Bond Dave bond has 16 years to maturity. 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.) Percentage change in price of Sam % Percentage change in price of Dave % If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Sam Percentage change in price of Dave % %
Chapter5: The Cost Of Money (interest Rates)
Section: Chapter Questions
Problem 19PROB
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Transcribed Image Text:Problem 8-18 Interest Rate Risk
Bond Sam and Bond Dave both have 10 percent coupon bonds outstanding, with
semiannual interest payments, and both are priced at par value. Bond Sam bond has five
years to maturity, whereas the Bond Dave bond has 16 years to maturity.
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.)
Percentage change in price of Sam
%
Percentage change in price of Dave
%
If interest rates were to suddenly fall by 2 percent instead, what would the percentage
change in the price of these bonds be then? (Do not round intermediate calculations
and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Percentage change in price of Sam
Percentage change in price of Dave
%
%
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