Homework answers / question archive / TIM Bond and CAP Bond are very popular in Canada

TIM Bond and CAP Bond are very popular in Canada

Finance

Share With

TIM Bond and CAP Bond are very popular in Canada. TIM Bond is a 3% coupon bond. CAP Bond is a 9% coupon bond. Both bonds have 15 years to maturity, make semi-annual payments and have a YTM of 6%. If interest rates suddenly rise by 2%, what is the percentage price change of these bonds? What if rates suddenly fall by 2% instead? What does this problem tell you about the interest rate risk of lower coupon bonds?