Peter is analyzing the following three bonds for investment:

Bond A	A 15 - year, $1,000, 5% semi - annual coupon bond issued by Company A
Bond B	A 1 0 - year, $1,000, 6% semi - annual coupon bond issued by Company B
Bond C	A 15 - year, $1,000, zero coupon bond issued by Company C

(a) If Bond C ( a zero coupon bond) is currently trading at $670 , what is YTM of Bond C ? Assume annual compounding. ( 2 marks)

(b) If Bond A is currently trading at par , what is the market price of Bond B if it has the same YTM as Bond A? (3 marks)

(c) i) What is the current yield of Bond A? (2 marks)

ii) Suppose Bond As YTM drops by 1% one year later. What is the capital gains yield of Bond A at that time?

(d) If Peter expects the interest rate to drop in the coming year, which bond (Bond A, Bond B or Bond C) would Peter choose to buy today? Explain briefly. (2 marks)