Both bond A and bond B have 7 percent coupons and are priced at par value. Bond A has 5 years to maturity, while bond B has 16 years to maturity.
a. If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Bond A %
Bond B %
b. If interest rates suddenly fall by 1.4 percent instead, what would be the percentage change in price of bond A and bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Bond A %
Bond B %