Assume you have a two-year investment horizon and invest in three different bonds that all have the same degree of default risk and mature in 6 years with a face value of $1000. Bond A is a zero-coupon bond. Bond B pays $32.5 coupon once per year. Bond C pays $75 coupon once per year. All three bonds are now priced to yield 3.25 percent to maturity. You forecast that in two years their yields to maturity will be 3.25 percent. Rank these three bonds from highest to lowest expected price increase during your investment horizon.

Select one:

a. A,C,B

b. A,B,C

c. C,A,B

d. B,C,A

e. C,B,A