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Consider the following bonds: Bond Maturity (Years) 16 A Coupon Rate (annual payments) 0% 0% 4% 8% B 11 C 16 D 11 (a) (3
Consider the following bonds: Bond Maturity (Years) 16 A Coupon Rate (annual payments) 0% 0% 4% 8% B 11 C 16 D 11 (a) (3 points each for a total of 12 points) What is the percentage change in the price of each bond if its yield to maturity falls from 4% to 3%? (b) (3 points) 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
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