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(b) You are the analyst in firm that is seeking to purchase a bond for $100,000.00. The management expects interest rate to increase in the

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(b) You are the analyst in firm that is seeking to purchase a bond for $100,000.00. The management expects interest rate to increase in the short term by 2 percentage points. i. Based on the options below which option would you recommend that the firm purchase and why? 16 marks ii. Based on the bond you recommended, what would be the estimated price change if interest rate increased by 2 percentage points. [3 marks] Bond A Bond B $100,000 3 years Principal Tenor Coupon rate Payment frequency Yield 10% Annually 9% $100,000 5 years 13% Annually 15%

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