Problem
Both Bond Sam and Bond Dave have 11.4 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 5 years to maturity, whereas Bond Dave has 22 years to maturity. Both bonds have a par value of 1,000.
1) If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?
2) If rates were to suddenly fall by 2 percent instead, what would be he percentage change in the price of these bonds?