Compute interest rate risk of lower-coupon bonds

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Question: Interest Rate Risk. Bond J has a coupon rate of 4 percent. Bond S has a coupon rate of 14 percent. Both bonds have 13 years to maturity, make semiannual payments, a par value of $1,000, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?

Reference no: EM131731083

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