Question 2 A. A $1000 par value bond has 15 years to maturity. Coupon of 8% is paid annually on the bond. An investor buys a bond today and the interet rates are at 8%. What is the rate of return for the investor if he holds the bond for one year and the interest rates are at 10% at the end of the year? Show your workings clearly. (25 marks) B. Calculate the Holding Period Yield (HPY) for a Treasury bill with 180 days to maturity and a quoted discount yield of 2% based on a 360-day year (bank discount yield=2%) (15 marks) C. As interest rates (YTM) change, prices of the bonds will also change. When interest rates are higher, lower or equal to the coupon rates of the bonds, how will prices of the bonds be affected in relation to their par values? (10 marks) [TOTAL 50 marks]