Think about the volatility

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We know that long-term bond prices are more volatile that short-term bond prices given equal coupon rates and bonds with lower coupon rates have greater price volatility than those with high coupon rates. But consider the following bonds:

Bond A: 8% Coupon, 8 year term

Bond B: 14% Coupon, 10 year term

The price of which bond would fall more if interest rates rise from the current yield to maturity of 8% (hint: calculate the duration for each bond and think about the volatility)?

Reference no: EM132697988

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