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Question: Both Bond Bill and Bond Ted have 9 perce...

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Question: Both Bond Bill and Bond Ted have 9 percent coupons, make semiannual payments and are priced at par value. Bond Bill has 3 years to maturity whereas, Bond Ted has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about interest risk of longer-term bonds? Please see attached. It is #16.

 

Paper#9596 | Written in 18-Jul-2015

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