Problem
A growing company intends to increase its capital by Rp10 billion through the issuance of bonds. The company has never entered the capital market before, so this plan is its debut. Bonds to be issued have a term of 5 years with coupons paid annually. It is known that currently the yield with the same tenor for bonds issued by a company with the same asset size as this company is 7% pa, while the yield on bonds issued by a company with a credit rating that is close to this company's condition is 8% pa
The company's management is determining the sensitivity of bond prices in terms of the maturity of the bonds and changes in market interest rates. Why bond prices with tenor 9-year bonds are more sensitive than 5-year bonds if interest rates change in financial markets.