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Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave has 12 years to maturity. (Do not round your intermediate calculations.)

Requirement 1: (a) If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam?

(b) If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Dave?

Requirement 2: (a) If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then?

(b) If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Dave be then?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92852215

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