For questions 31 and 32 use the following information You hold a portfolio of two bonds. Both bonds have Par Value of $1,000 and a Yield to Maturity of 5%. Bond A is a zero-coupon bond with a maturity of 3 years. Bond B pays a 5% coupon annually and has a maturity of 3 years.

31. What is the duration of your bond portfolio?

A) 2 years

B) 2.5 years

C) 2.86 years

D) 2.92 years

E) 3 years

32. Suppose the Yield to Maturity on each bond suddenly rises to 7%. Bond As price will _______ than Bond Bs price.

A) Increase by a greater percentage

B) Increase by a smaller percentage

C) Decrease by a greater percentage

D) Decrease by a smaller percentage

E) The price of both bonds will stay at $1,000