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(a) 0% You are given the details of the following bonds: Bond A Bond B Bond C Maturity 5 years 5 years 5 years Bond
(a) 0% You are given the details of the following bonds: Bond A Bond B Bond C Maturity 5 years 5 years 5 years Bond Rating AAA AAA AAA Coupon (paid semi-annually) 4% 5% Yield to Maturity 3% 8.5% 3% Based on the details of the three bonds, analyse which bond will be priced at the biggest discount. (4 marks) (ii) If the interest rate were to increase, discuss which bond will be affected most. (4 marks) If the bond rating for Bond A is lowered to BBB, discuss what must happen to the yield to maturity. (4 marks)
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