Bond a has 4 years left to maturity and bond b has 8 years


Bond A has 4 years left to maturity and Bond B has 8 years left to maturity. They both have a 6% coupon rate, pays semi annually, and yield is 5%. Calculate the percentage change in each bond if interest rates suddenly increased by 2%.

A: -7.27%, B: -13.38%

A: -6.78%, B: -11.80%

A: 7.27%, B 13.38%

A: 6.78%, B: 11.80%

None of the above

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Financial Management: Bond a has 4 years left to maturity and bond b has 8 years
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