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a. Pitcher Inc. has issued the following 2 bonds with a face value of $1,000. Bond Years to Maturity Coupon rate Coupon frequency A 11

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a. Pitcher Inc. has issued the following 2 bonds with a face value of $1,000. Bond Years to Maturity Coupon rate Coupon frequency A 11 years 10% Semi-annual 11 years 3% Semi-annual Given the market rate of interest is 7% 1. What is the price of bond A? (2.5 marks) 2. What is the price of bond B? (2.5 marks) 3. Which bond's price is more sensitive to the changes in interest rate? Explain. (2 marks) b. Why does the default risk premium vary over the business cycle? (3 marks) BO

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