Which bond has more price volatility

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1. A bond with a 20-year maturity pays a 6% annual coupon and has a face value of $1,000. What is its fair price at a yield-to-maturity of 3%? Of 6%? Of 9%?

2.The same company has another bond with a 2-year maturity that is a 1% annual coupon bond. What is its fair price at yield-to-maturity of 3%, 6% and 9%?

3. Which bond has more price volatility? What does this mean, and how do you explain it using your answers to 1 and 2? Explain this quantitatively and qualitatively.

Reference no: EM133073792

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