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Consider the following bonds: Bond Coupon Rate (annual payments) Maturity (years) A 0% 15 B 0% 12 C 5% 15 D 10% 12 a. What

Consider the following bonds:

Bond	Coupon Rate (annual payments)	Maturity (years)
A	0%	15
B	0%	12
C	5%	15
D	10%	12

a. What is the percentage change in the price of each bond if its yield to maturity falls from 7% to 6%?

b. Which of the bonds AD is most sensitive to a 1% drop in interest rates from 7% to 6% and why? Which bond is least sensitive? Provide an intuitive explanation for your answer.

Note: Assume annual compounding.

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