4. Your client is considering investing in one of the two Treasury bonds which have a face value of $100,000 and pay coupons at the rate of 10% semi-annually. Bond P has four years to maturity and bond Q has eight years to maturity. Your client would like to know:

(a) If the current interest rate is 7.5% p.a., what are the prices of the two bonds?

(b) If the interest rate rises to 12% p.a., what are the prices of the two bonds?

(c) What are the observations can be made based on these results?

Business Finance Question. Kindly show all the workings in the answer