Both Bond A and Bond B have 8% coupon rate. Bond A has 4 years to maturity, while Bond B is 14 years to maturity. Both bonds have 10% yield to maturity (YTM), and make semi-annually payment 3

I. If interest rates increase by 4%, determine the percentage price change of both bonds.

ii. If interest rate decrease by 4%, determine the percentage price change for both bonds.

iii. Explain the concept of maturity and coupon bonds based on the answer in part i and ii.

b. Elaborate TWO (2) advantages of bond investing in comparison to stock investing