QUESTION THREE (10 POINTS) a) Explain the concept of bond price elasticity. Would bond price elasticity suggest higher price sensitivity for zero-coupon bonds or high-coupon bonds that are offering the same yield to maturity? Why? What does this suggest about the market value volatility of mutual funds containing zero- coupon Treasury bonds versus high-coupon Treasury bonds? (5 Points) b) A U.S. investor obtains British pounds when the pound is worth $1.50 and invests in a one-year money market security that provides a yield of 5 percent (in pounds). At the end of one year, the investor converts the proceeds from the investment back to dollars at the prevailing spot rate of $1.52 per pound. Calculate the effective yield. (5 Points)