22526/files/63376552module jitem_ide 2206940 Page 2 of 3 O Problem 4 (10 points): Consider the following two bonds with the same face value of $1,000 and coupon rate of 5%. Coupons are paid annually. Compounding also takes place every year. Bond A has a maturity of 5 years, while bond B has a maturity of 10 years. a. b. What are the current prices of bond 1 and bond 2, if the interest rate is 5%? (Spoints) Suppose that the interest rate increases to 10%. what are the new prices of the two bonds? Which bond is affected more? (5 points) Problem 5 (10 points): Consider the following two bonds with the same face value of $1,000 and maturity of 10 years. Coupons are paid annually. Compounding also takes place every year. Bond A has a coupon rate of 5%, while bond B has a coupon rate of 10%. a. b. what are the current prices of bond 1 and bond 2, if the interest rate is 5%? (5 points) Suppose that the interest rate increases to 10%, what are the new prices of the two bonds? Which bond is affected more? (5 points) MacBook Air