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11 5. (10 points) You expect the interest rates will continue to rise for some time due to strengthening economic actvity and rising infationary expectation.

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5. (10 points) You expect the interest rates will continue to rise for some time due to strengthening economic actvity and rising infationary expectation. Please determine for each part which of the two bonds you should purchase today and justity your answer. (i). Bond A is a 6% coupon bond, with 30-years to maturity, selling below the par value. Bond B is a 6% coupon bond, with 30-years to maturity, selling above the par value. (ii). Bond C is a 4% coupon bond, with 30-years to maturity, selling at par value. Bond D is a 4% coupon bond, with 25-years to maturity and 6% YTM (iii). Bond E is a 15-yr STRIP bond with 7% YTM. Bond F is a 3 % coupon bond, with 10-years to maturity, selling at par. STRIP bond is a zero-coupon bond issued or backed by Federal government

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