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What percentage will the price of the two bonds change

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Bond X pays an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds have 10 years to maturity. The yield to maturity for both bonds is now 8%.

Question (a) If the interest rate suddenly rises by 2%, by what percentage will the price of the two bonds change?

Question (b) If the interest rate suddenly drops by 2%, by what percentage will the price of the two bonds change?

Question (C) Which bond has more interest risk? why?

Reference no: EM132497381

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