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Present value exceeds the call price

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Consider two 10-year coupon bonds with coupon rates of 5% and 7%, respectively. Assume that coupons are paid once a year. Both bonds are callable at 1100.

Currently, both bonds are priced with a YTM of 6%. What will be the price change on each bond if the yield suddenly falls to 5%.

The bonds will be called immediately when the present value exceeds the call price.

Price change on the 5% coupon bond?

Price change on the 7% coupon bond?

Reference no: EM133233510

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