Question 3 Bond X is a 6% coupon (paid semi-annually), 2-year bond with a face value of $100. Bond Y is a 4% coupon (paid semi-annually), 2-year bond with a face value of $100. Bond Z is a 5% coupon (paid semi-annually), 3-year bond with a face value of $100. The yield curve is flat at 8% per annum.

i) Compute the current price of bond X. ii) Compute the new price of bond X if the yield curve falls to 5% and if the yield curve jumps to 8%. iii) Compute the current price of bond Y. iv) Compute the new price of bond Y if the yield curve falls to 3%. What is the percentage price change? v) Compute the current price of bond Z. vi) Compute the new price of bond Z if the yield curve falls to 4%. What is the percentage price change? How does it compare to the price change in (ii)? Question 4