Consider two bonds. Each has a face value of $100 and matures in 10 years. One has no coupon payments, and the other pays $10 per year.
a. Calculate the price of each bond if the interest rate is 3 percent and if the interest rate is 6 percent.
b. When the interest rate rises from 3 percent to 6 percent, which bond price falls by a larger percentage? Explain why.