Home / Questions / Interest Rate Risk. Consider two bonds, a 3-year bond paying anannual coupon of 5% and a 1
Interest Rate Risk. Consider two bonds, a 3-year bond paying anannual coupon of 5% and a 10-year bond also with an annual couponof 5%. Both currently sell at face value. Now suppose interestrates rise to 10%. (LO6-3) a. What is the new price of the 3-yearbonds? b. What is the new price of the 10-year bonds? c. Do youconclude that long-term or short-term bonds are more sensitive to achange in interest rates?
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