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Long term Treasury bonds are currently selling at YTM of 8%%. You expect interest rates to fall. The rest of the market thinks that they

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Long term Treasury bonds are currently selling at YTM of 8%%. You expect interest rates to fall. The rest of the market thinks that they will remain unchanged over the coming year. Choose the bonds that will provide the higher capital gain in (a), (b) and (c). (a) (1) a Baa-rated bond with coupon rate 8% and time to maturity 20 years. (2) an Aaa-rated bond with coupon rate 8% and time to maturity 20 years. (b) (3) an A-rated bond with coupon rate 4% and maturity 20 years. (4) an A-rated bond with coupon rate 8% and maturity 20 years. (c) (5) a 6% coupon T-Bond with maturity 20 years and YTM-8%. (6) a 9% coupon T-Bond with maturity 20 years and YTM=8%%. 1, 3, 5 1, 4, 6 , 4, 2. 3, 6 None of the above

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