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Assignment on interest rate risk

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Interest rate risk [LO6.1] Playground Corporation has two bonds outstanding, both of which have a 9 per cent coupon rate (with annual coupons) and sell for their $100 par value. The first bond, bond A, has four years to maturity. The second bond, bond B, has eight years to maturity. If market interest rates were to rise by 2 per cent, which bond would have the larger price change? Calculate the new prices to illustrate your answer.

Reference no: EM132999552

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