Problem:
Assume that Bond A represents a 10% annual coupon bond with 10 years to maturity, a face value of $1000, and a yield of 10%. Bond B represents a 10% annual coupon bond with five years to maturity, a face value of $1000, and also has a yield of 10%. Now, assume the yield on both bonds rises to 11%. On a percentage basis, which bond has lost more value, and why is this the case? Be sure to identify the percentage change in the prices of both bonds.