Laurel, Inc., and Hardy Corp. both have 8 percent,bonds outstanding, with semiannual interest payments, and both are priced at,value. The Laurel, Inc., bond has 2 years to maturity, whereas the Hardy Corp.,has l5 years to maturity. If interest rates suddenly rise by 2 percent, what is the,centage change in the price of these bonds? If interest rates were to suddenly,2 percent instead, what would the percentage change in the price of these,then? Illustrate your answers by graphing bond prices versus YTM. What does,problem tell you about the interest rate risk of longer-term bonds?
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