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QUESTION 2 You are considering the following AAA rating bonds. Description CouponMaturity Price Bond-A 10% 10 years 1,000 Bond-B 5 % 10 years 1,000 Bond-C
QUESTION 2 You are considering the following AAA rating bonds. Description CouponMaturity Price Bond-A 10% 10 years 1,000 Bond-B 5 % 10 years 1,000 Bond-C 5 % 10 years 1,000 Bond-D 5 % 10 years 1,000 Callable Call Price noncallable NA noncallable NA callable 1,250 callable 1,050 If the market interest rate is predicted to increase, then choose the correct statements: The price of Bond-C should decrease the most. The price of Bond-D should decrease the most. O Bond-A has a higher convexity than Bond-B since it has a higher coupon. Bond-C has a higher convexity than Bond-D since it has a higher callable price. Bond-A has a lower duration than Bond-B since it has a higher coupon
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