You own two bonds, each of which currently pays semiannual interest, has a coupon rate of 6 percent, a $1,000 face value, and 6 percent yields to maturity. Bond A has 12 years to maturity and Bond B has 4 years to maturity. If the market rate of interest rises unexpectedly to 7 percent, Bond _____ will be the most volatile with a price decrease of _____ percent.
A. A; 5.73
B. A; 3.44
C. A; 8.03
D. B; 7.97
E. B; 4.51
Ans: C. A; 8.03
Business
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