Solved: Determining the price change of bond, Finance Basics

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Determining the price change of bond

Problem: Cary owns the following two bonds of comparable quality and characteristics; what is the current price of Bond S?

Bond R Bond S

Term Left           15y         9y
Coupon Rate    5.625%    2.25%
Current Price   104.50         ?

a) Which is more volatile?

b) What is the price change of Bond R if its interest rates decline to 3.75%?

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Finance Basics: Determining the price change of bond

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Finance Basics: Determining the price change of bond

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