Both Bond Bill and Bond Ted have 7 percent coupons, create semi-annual payments, and are priced at par value. Bond Bill has three years to maturity, whereas Bond Ted has twenty years to maturity.
problem1: If interest rates suddenly rise by two percent, what is the percentage change in the price of these bonds? (Don’t round intermediate computation. Negative amounts must be indicated by a minus sign.)
problem2: If rates were to suddenly fall by two percent instead, what would be the percentage change in price of these bonds? (Do not round intermediate calculations.)