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3. Bond A is a 5 percent coupon bond. Bond B is a 10 percent coupon bond. Both bonds have 10 years to maturity,
3. Bond A is a 5 percent coupon bond. Bond B is a 10 percent coupon bond. Both bonds have 10 years to maturity, make semiannual payments, and have a yield-to-maturity of 8 percent. a. If interest rates are expected to rise by 2 percent after two years, what will the percentage change in the current price of Bond B be? (5 marks) (Hint: you will need to know how much the bond will be worth at the end of 2 years) b. Without calculation, explain which bond has more price risk (5 marks)
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