2. Consider the following 3 semiannual bonds with par $1,000:

Bond A: 5-year bond with coupon rate 6%

Bond B: 10-year bond with coupon rate 6%

Bond C: 10-year bond with coupon rate 10%

Step 1: (1.5 points) Calculate the prices of Bond A, Bond B, and Bond C based on the required yield=7%. Bond A = Bond B = Bond C =

Step 2: (3 points) For each bond (Bond A, Bond B, or Bond C), conduct a scenario analysis through Data Table to report the bonds price at yields 3.5%, 4%, 4.5%, 5%, 5.5%, 6%, 6.5%, 7%,7.5%, 8%, 8.5%, 9%, 9.5%, and 10%.

Step 3: (1.5 points) Setting the case at yield 7% as the benchmark (P0 case). Calculate the dollar price change for each bond at each new yield level following the formula: Dollar Price Change= Pt-P0

Step 4: (1.5 points) (1) Select a case to verify: For a given term to maturity and initial yield, the higher the coupon rate, the higher the dollar price change. (2) Select a case to verify: For a given coupon rate and initial yield, the longer the term to maturity, the higher the dollar price change.

Step 5: (2 points) Setting the case at yield 7% as the benchmark (P0 case). Calculate the relative price change for each bond at each new yield level following the formula: Relative Price Change= (Pt-P0)/P0

Step 6: (1.5 points) (1) Select a case to verify: For a given term to maturity and initial yield, the higher the coupon rate, the lower the relative price change. (2) Select a case to verify: For a given coupon rate and initial yield, the longer the term to maturity, the higher the relative price change.