Which bond price falls by a larger percentage

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Reference no: EM131220650

Consider two bonds. Each has a face value of $100 and matures in 10 years. One has no coupon payments, and the other pays $10 per year.

a. Calculate the price of each bond if the interest rate is 3 percent and if the interest rate is 6 percent.

b. When the interest rate rises from 3 percent to 6 percent, which bond price falls by a larger percentage? Explain why.

Reference no: EM131220650

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