Consider two zero coupon bonds. Both have face values of $100. Bond A pays its face value in 8 years, and Bond B pays its face in 2 years. If interest rates change from 9% to 7%, what is the percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price?
Added by Judith V.
Step 1
The price of a zero-coupon bond is the present value of its face value: Price = Face Value / (1 + r)^t Where r is the interest rate and t is the time to maturity in years. Show more…
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