On May $30,2012,$ Janice Kerr is considering one of the newly issued $10-$year AAA corporate

bonds shown in the following exhibit.

a$.$ Suppose that market interest rates decline by $100$ basis points $($i$.$e$.,1\%).$ Contrast the effect of

this decline on the price of each bond.

b$.$ Should Kerr prefer the Colina over the Sentinal bond when rates are expected to rise or to fall?

c$.$ What would be the effect, if any, of an increase in the volatility of interest rates on the prices

of each bond?