Find what is the percentage change in price for each bond

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Both Bond J and Bond K have 7.3 percent coupons, make semiannual payments, and are priced at par value of $1,000. Bond J has three years to maturity, whereas Bond K has 20 years to maturity.

Problem a. What is the YTM for each bond?

Problem b. If interest rates suddenly rise by 2 percentage points, what is the new price of Bonds J and Bond K respectively? What is the percentage change in price for each bond?

Problem c. If rates were to suddenly fall by 2 percentage instead, what is the new price of Bonds J and Bond K respectively? What is the percentage change in price for each bond?

Problem d. In one sentence, what is the relationship between changes in interest rate and the impact to pricing for bonds of different maturities?

Reference no: EM132809668

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