What is the new price of Bonds J and Bond K

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Question - Both Bond J and Bond K are priced $750 and have a par value of $1,000 and have 10 years to maturity. Bond J is a zero-coupon bond and Bond K has an 8 percent coupon rate. Assume annual compounding.

Required -

a. What is the YTM for each bond?

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?

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

Reference no: EM132787702

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