Both Bond Sam and Bond Dave have 6 percent coupons

Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 13 years to maturity. (Do not round your intermediate calculations.)

If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Sam?
If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond Dave?
If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Sam be then?
If rates were to suddenly fall by 4 percent instead, what would the percentage change in the price of Bond Dave be then?

Bond J is a 5 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 8 percent.

If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond J?
If interest rates suddenly rise by 3 percent, what is the percentage price change of Bond K?
If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond J?
If interest rates suddenly fall by 3 percent, what is the percentage price change of Bond K?

Here’s the SOLUTION

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