Consider the following 2 bonds:

- a 5-year 10% annual coupon bond with a par value of 100

- a 5-year 1% annual coupon bond with a par value of 100

a) Suppose that the current interest rate and the yield to maturity of these bonds is 10%. Calculate the Macaulay duration for these bonds.

b) Calculate percentage price changes for both bonds as the interest rate changes from 10% to 12%.

c) Calculate percentage price changes for both bonds as the interest rate changes from 10% to 8%.

d) Which bonds price is affected more (in terms of percentage change) by the interest rate change? How is it related to bonds duration?