Question

Both Bond A and Bond B have 9 percent coupons and are priced at par value. Bond A has 5 years to maturity, while

Bond B has 20 years to maturity.

a. If interest rates suddenly rise by 1.6 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. If interest rates suddenly fall by 1.6 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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