Question 3: Great Deals LLC appointed you as a financial analyst, and provided you the following information about three bonds: B 20 25 25 Bonds Term to maturity (years) Annual coupon rate Frequency of coupons Face value 7.5% 10% Semi annual 5% Semi annual $1,000 Semi annual $1,000 $1,000 YTM old 7.5% 75% new 75% 11% 11% 11% (a) Estimate the value of Bonds A, B and C, based on the old YTM of 7,5% [3 marks) (6) If the interest rates increase from 7.5% to 11% for Bonds A and B, what can you observe on the relationship between the term to maturity and price risk? Show your workings. [3 marks) (c) If the interest rates increase from 7.5% to 11% for Bonds B and C, what can you observe on the relationship between the coupon rate and price risk? Show your workings. [3 marks) (d) Out of the three bonds, which one would you recommend if you want to reduce the chance of a depreciation in the value of the bond? Explain your answer. [1mark) etv