Bond	Coupon Rate (annual payments)	Maturity (years)
A	0%	13
B	0%	8
C	4%	13
D	7%	8

a. What is the percentage change in the price of each bond if its yield to maturity falls from

6%

to

5%?

b. Which of the bonds

AD

is most sensitive to a 1% drop in interest rates from

6%

to

5%

and why? Which bond is least sensitive? Provide an intuitive explanation for your answer.

Note:

Assume annual compounding.