Problem:
Bond J has a coupon rate of 4.2 percent. Bond S has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, make semiannual payments, and have a YTM of 9.4 percent. If interest rates suddenly rise by 2 percent what is the percentage change in the price of these bonds?
Required:
If interest rates suddenly fall by 2 percent what is the percentage change in the price of these bonds?
Note: Provide support for rationale.