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Considering the following two bonds: Bond A: 5% Coupon; 5 Year Maturity Bond B: 6% Coupon; 5 Year Maturity The current yield on both bonds

Considering the following two bonds:

Bond A: 5% Coupon; 5 Year Maturity

Bond B: 6% Coupon; 5 Year Maturity

The current yield on both bonds is 3%

Explain conceptually (without any calculations) the followings:

-Which bond will have higher price and why.

-Which bond price change will be greater (and why) if the yield changes to 4%.

Also explain what does the yield-to-maturity (YTM) measure? And what are the issue(s) using the YTM as a measure.

Y, a CFA, is an analyst specialising in bond valuation; while B, also a CFA, is an equity analyst specialising in stock valuation. Who faces greater difficulty in the security valuation? Explain why.

In active portfolio management, anomaly-based investment strategies are common. Identify and explain these strategies. Also explain what would be the main factors that contribute to the high returns of these strategies.

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