A 1000, 7% coupon bond has 15 years remaining until maturity. The rate of return required by the…

A A 1000, 7% coupon bond has 15 years remaining until maturity. The rate of return required by the...1000, 7% coupon bond has 15 years remaining until maturity. The rate of return required by the market on these bonds has recently been 7% (compounded semiannually). Calculate the price change if the required return abruptly:

(a). Rises to 8%. (b). Rises to 9%. (c). Falls to 6%. (d). Falls to 5%.

(e). Is the price change caused by a 2% interest rate increase twice the price change caused by a 1% interest rate increase?

(f). Compare the magnitude of the price change caused by a 1% interest rate increase to the price change caused by a 1% interest rate decrease.

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