Consider the following bonds: Bond A Coupon Rate $($annual payments$)0\%$ maturity $($years$)17,$ Bond B Coupon Rate $($annual payments$)0\%$ maturity $($years$)8,$ Bond C Coupon Rate $($annual payments$)2\%$ maturity $($years$)17,$ Bond D Coupon Rate $12\%$ maturity $($years$)8$

a$.$ What is the percentage change in the price of each bond if its yield to maturity falls from $4\%$ to $3\%?$

b$.$ Which of the bonds A $-$ D is most sensitive to a $1\%$ drop in interest rates from $4\%$ to $3\%$ 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 $4\%$ to $3\%?$

The percentage change in bond $A$ is $\%.($Round to two decimal places.$)$

The percentage change in bond $B$ is $\%.($Round to two decimal places.$)$

The percentage change in bond $C$ is $\%.($Round to two decimal places.$)$

The percentage change in bond $D$ is $\%.($Round to two decimal places.$)$

b$.$ Which of the bonds A through $D$ is most sensitive to a $1\%$ drop in interest rates, from $4\%$ to $3\%,$ and why?

Which of the bonds A through $D$ is least sensitive to a $1\%$ drop in interest rates, from $4\%$ to $3\%,$ and why?