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Case study #1 : Bonds and Interest Rate Risk Today is Marchl, 2006. Consider the following two (semi-annual coupon) bonds: Bond A Bond B Maturity

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Case study #1 : Bonds and Interest Rate Risk Today is Marchl, 2006. Consider the following two (semi-annual coupon) bonds: Bond A Bond B Maturity Date Coupon Rate Current Price March 1, 2012 4% $948.71 March 1, 2013 12% $1,273.01 (a) What is the YTM on each bond? Assume that the YTM on Bond A changes to 6%; (bi) What is the new price of Bond A? (bii) What is the capital gain yield on Bond A

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