101. coupon rait, ber bred A maters in 3 yrae whele Roed B matures it 30 years. 1.) a) What was the purchase price an Bast A7 b) What was the parchase price on Boed te? a) What is the curtent jarice an Baned is? N=T=T=N=BACT=V= Part II. In class, we went over the intuition of why long-term bonds and lower-coupon bonds have higher price risk (interest rate risk). In this exercise, you will do some bond valuation to demonstrate this fact mathematically. Interested in bond market, you decided to invest in two bonds with the same features except for time to maturity. These two bonds have $1000 face value, semiannual coupon payments with 10% coupon rate, but Bond A matures in 3 years while Bond B matures in 30 years. Q5. (5pts) When you bought these bonds, the market rate for bonds similar to Bond A was 10%/year, whereas market rate for bonds similar to Bond B was 12\%/year (Bond B is longerterm, hence, higher interest rate - recall the maturity risk premium that you just went over in Part 1.) a) What was the pai-chase price on Bond A ? N=I=PV=,PMT=FV= b) What was the purchase price on Bond B? N=,PV=PMT=,FV= Q6. (5pts) Now, suppose that 2 years after you bought the bonds, market interest rate has increased by 2% for all bonds (Market rate is now 12% for bond A and 14% for bond B). Bond A now has 1 year to maturity, and Bond B has 28 years. (5pts) a) What is the current price on Bond A? N=,I=,PV=,PMT= b) What is the current price on Bond B? N=,I=,PV=,PMT=,FV=