Consider the following information about Bond A and Bond B. Both bonds make semi-annual coupon payments, and are issued at the par value.

Required :

i) If interest rate increases by 2 percent, what is the percentage change in value of each Bond A and Bond B? (8 marks)

ii) Based on your answer in (i), discuss the link among interest rate and bond value and its relation to time to maturity. (5 marks)

Didnt hv this information

Bon/ Bond A Bon/ Bond B Kadar kupon/ Coupon rate (peratus/percent) Tempoh masa matang / Time to maturity (tahun/years) Nilai par/ Par value 3 RM1,000 RM1,000 20