Question 3: Bond Valuation (6 MARKS) a) You have been offered a bond that will pay a coupon rate of 4% per annum, matures in 20 years and currently has a yield to maturity of 4.5% per annum. What price would you be willing to pay for this bond if it had a RMB1,000 face value? Click here to enter text. (1 Marks) b) The central bank is expected to cut interest rates later today and you think this will reduce the yield to maturity to 4.25%. How much will this change the price of the bond? Click here to enter text. (2 Marks) c) You have been offered two bonds. Thor Construction is offering a 5-year, semi-annual coupon bond with a RMB1,000 face value and a 5% coupon rate that is currently selling for RMB1,025. Hermod Communications is offering a 5-year zero coupon bond that has a face value of RMB1,000 and a price of RMB825. Based on yield to maturity, which of these two bonds is considered to be the riskiest? Justify your answer Click here to enter text. (3 Marks) +