Both Bond Bill and Bond Ted have 9.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 7 years to maturity, whereas Bond Ted has 24 years to maturity.
Requirement:
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?
Requirement:
If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds?