1. (12 points) Bond A is a semiannually compounded, zero-coupon bond with a face value of $1,000.00. At issuance, the market interest rate for bonds with a similar risk profile was 6.50%. For Bond A, given different bond maturities (Column A), compute Bond As price at a market interest rate of 6.50% (Column B) and 10.00% (Column C). Next, compute the percent change in Bond As prices as the market interest rate increases from 6.50% to 10.00% (Column D). Essentially, Column D is measuring the bonds sensitivity to interest rate changes.

Time to Maturity (Years) I/YR = 6.50% I/YR = 10% % Price 1 5 15 30