Question
An investor is considering the following six annual coupon payment government bonds: Bond Coupon Rate Time-to-Maturity Yield-to Maturity A 6% 8 years 3.50% B 6%
An investor is considering the following six annual coupon payment government bonds: Bond Coupon Rate Time-to-Maturity Yield-to Maturity A 6% 8 years 3.50% B 6% 6 years 4.50% C 5% 8 years 3.50% D 5% 6 years 4.50% E 4% 8 years 3.50% F 4% 6 years 4.50% 1. Based on the relationships between bond prices and bond characteristics, which bond will go up in price the most on a percentage basis if all yields go down by 10 basis points? 2. Based on the relationships between the bond prices and bond characteristics, which bond will go down in price the least on a percentage basis if all yields go up by 10 basis points?
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