7. Assunse you are in the 30 tex bracket. Which of the following twe bonds would you efor if both bonds were consolfered eyally risky and were wailstic to you at the same price? Bend A is a reculse taxsble hosid that pays a coupon or sha per year, while Bond is is a tax-exeingt eminitipal bond that pays a poupen of 6% per year. Both bonde have the same face value. (a) Bosd A (b) Bond B (c) I would be indifferent between Bonds A and B (d) Not encugh information to answer the question. Answer for (7) 8. Consider the following 3 bonts all issued by the samse coropany. All three bonds have the same face value and the same required rate of return of x%. Bond A is a 10 year, 109 coupon bond. Bond B is a 30 -year, 10% coupon bond. Bond C is a 10 yeae, yero-coupon bond. Asume that iaterest rate suddenly inereises from x% to (x+3)%. Which of the following statements is true as imterest ratc increases"? (a) The percentage price drop in Bond A will be more than the percentage price deop in Bond B, and the percentage price drop in Bond A will be moee than the percentage price drap in Boind C (b) The percentage price drop in Bond A will be less than the percentage price drop in Bond B, and the perecntage price drop in Bond A will be more than the percentage price drop in Bond C. (c) The percentage price drop in Bond A will be more than the percentage price drop in Bond B, and the percentage price drop in Bond A will be less than the percentage price drop in Bond Cis (d) The perventage price drop in Bond A will be less than the percentage price drop in Bond B, and the percentage grice drop in Bond A will be less than the percentage price drop in Bond C. Answer for (8)