Bond A is a 4% coupon bond. Bond B is a 9% coupon bond. Both bonds have eight years to maturity, $1,000 face value, make half-yearly payments, and have a YTM of 6%. Currently, Bond A is selling at $874.39 and Bond B at $1,188.4165. If interest rates suddenly fall by 2%, what are the new prices of Bond A and B? (4 marks)

b. Based on the price you get from (a), show the price change and the percentage price change of these bonds, when interest rate decreases from 6% to 4%? (4 marks) c. What does Question b) tell you about the interest rate risk? (2 marks)