Question 2 As an aggressive investor, your investment objective is to maximize capital gains. You are considering to trade bonds. The information for the bonds available on the market is as follows: Bond A with modified duration of 7.56 years with yield to maturity of 10% Bond B with modified duration of 8.36 years with yield to maturity of 9% Bond C with modified duration of 9.75 years with yield to maturity of 8% If the bonds are alike in all other respects, determine the bond you should trade if you believe the market interest rates are going to decrease from current rate of 8% to 7.5% in the near future. Explain and provide a numerical evidence to support your answer. (9 marks) Question 3 You have been watching a stock which is currently trading at RM50 per share. You would like to buy the stock if it were a little less expensive, at RM47 per share. You believe that the stock price will go to RM70 by year-end, and then level off or decline. You decide to place a limit order to buy 100 shares of the stock at RM47, and a limit order to sell it at RM70. It turns out that you were right about the direction of the stock price, and it goes straight to RM75. Determine your current position. Calculate your gains/loss of your stock holding. (6 marks) [Total = 50 marks]