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I need the answers for part A and B pleaseeee Question 6 a) Calculate the approximate price change of two bonds, one with a 3-year
I need the answers for part A and B pleaseeee
Question 6 a) Calculate the approximate price change of two bonds, one with a 3-year duration and the other with a 5 -year duration, when interest rates rise from 4% to 5%. Which of the bonds would you rather hold? (5 marks) b) If the interest rates on one-to-five-year bonds are currently 7%,6%,5%,6% and 7% and the term premiums for one-to-five-year bonds are 0%,0.15%,0.25%,0.30% and 0.60%, predict what the one year interest rate will be four years from now. (5 marks) c) If the income tax rates are reduced, what will be the corresponding effect on the interest rates of municipal bonds? Would interest rates on Treasury securities be affected? HowStep by Step Solution
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