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Question 3 (a) You are given the details of the following bonds: Bond B 10 years Maturity Bond rating Coupon Yield to maturity Bond A

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Question 3 (a) You are given the details of the following bonds: Bond B 10 years Maturity Bond rating Coupon Yield to maturity Bond A 5 years AAA 5% 4% A 0% 6% (i) Based on the details of the two bonds, discuss why Bond B has a higher yield to maturity than Bond A. (8 marks) (ii) Are there other reasons, besides those discussed in part (i) that can possibly explain the difference in yields and differentiate between them? (4 marks)

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