Compare the Price Sensitivity to Changes in Interest Rates for the Following

question 63

Essay

Compare the price sensitivity to changes in interest rates for the following bonds: a 5-year and a 10-year bond,each with a 7% coupon.Both bonds currently sell at par.How much will the price of each bond change if interest rates increase to 8%? Why is there a difference in the price change?

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Definitions:

Supergroup

A high-level taxonomic rank in the classification of organisms, above kingdom, proposed to accommodate the phylogenetic relationships.

Forams

are short for foraminifera, a large group of amoeboid protists with calcareous shells, used in geological dating and paleoclimate estimation.

Representative Clade

A group of organisms that includes an ancestor and all of its descendants, representative of a larger evolutionary group.

Supergroup

A classification level in the hierarchy of biological taxonomy, designed to help categorize organisms that share fundamental evolutionary traits beyond the domain and kingdom level.