Bond X has a coupon rate of 9%, and Bond Y pays a 4% annual coupon. Assume that both bonds have a $1,000-par-value.Both bonds have 19 years to maturity. The yield to maturity for both bonds is now 9%.
a. If the interest rate rises by 2%, by what percentage will the price of the two bonds change?
b. If the interest rate drops by 2%, by what percentage will the price of the two bonds change?
c. Which bond has more interest rate risk? Why?