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Consider the following bonds: a. What is the percentage change in the price of each bond if its yield to maturity falls from 5% to
Consider the following bonds: a. What is the percentage change in the price of each bond if its yield to maturity falls from 5% to 4% ? b. Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 5% to 4% and why? Which bond is least sensitive? Provide an intuitive explanation for your answer. Note: Assume annual compounding. a. What is the percentage change in the price of each bond if its yield to maturity falls from 5% to 4%? The percentage change in bond A is \%. (Round to two decimal places.)
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