Consider the following two bonds (assume annual coupons) Bond A Coupon 9% YTM (years) 10% Time to maturity (years) 2 Par $1000 Price $982.595 Bond B 10% 10% 4 $1000 $1000 a) Calculate the actual price of the bonds for a 100 basis point (i.e. 1%) increase in interest rates. b) Using modified duration, estimate the price of the bonds for a 100 basis point increase in interest rates. c) Would the same change of interest rates but in the opposite direction produce the same magnitude of change in bond prices? Comment! (No calculations are required) d) For a bond investor interested in price appreciation, which bond would you recommend? Why? Consider the following two bonds (assume annual coupons) Bond A Coupon 9% YTM (years) 10% Time to maturity (years) 2 Par $1000 Price $982.595 Bond B 10% 10% 4 $1000 $1000 a) Calculate the actual price of the bonds for a 100 basis point (i.e. 1%) increase in interest rates. b) Using modified duration, estimate the price of the bonds for a 100 basis point increase in interest rates. c) Would the same change of interest rates but in the opposite direction produce the same magnitude of change in bond prices? Comment! (No calculations are required) d) For a bond investor interested in price appreciation, which bond would you recommend? Why