1.A 10 year bond has a yield to maturity of 4%. Which would result in the largest % change in the bond's price, a rise in the yield to 5% or a fall to 3%? Why?(2 marks)

Suppose a recently published report indicates inflation in both Canada and the U.S. is at an all time low and the Canadian dollar is strengthening. You hear a news report that the bond market has rallied (prices have increased). Which of the following Canadian bonds would likely show the highest % price increase? Why?1.

i.Low coupon, short-term

ii.High coupon, long-term

iii.High coupon, short-term

iv.Low coupon, long-term