Question 7 You are asked to invest $100,000 in two types of bonds for a client. B1 is a government bond that has a yield to maturity of 3% per year APR and sells at 100. B, is a highly rated bond that has a yield to maturity of 5% per year and sells at 95. Both bonds mature in five years time. The client wants an overall yield to maturity of 4% per year over the next five years. (i) Write down the equations for the amount of money to be invested in each of B and B2. (ii) Will you buy more bonds of (B1) or (B2)? (Circle one) Suppose A and B are two bonds with the same time to maturity. If the coupon rate of A is higher than that of B (TA >rb), then (iii) Is the price of A higher than the price of B? Yes or No (Circle one). Yes or (iv) Is the Macaulay duration of A higher than the Macaulay duration of B? No (Circle one). Question 7 You are asked to invest $100,000 in two types of bonds for a client. B1 is a government bond that has a yield to maturity of 3% per year APR and sells at 100. B, is a highly rated bond that has a yield to maturity of 5% per year and sells at 95. Both bonds mature in five years time. The client wants an overall yield to maturity of 4% per year over the next five years. (i) Write down the equations for the amount of money to be invested in each of B and B2. (ii) Will you buy more bonds of (B1) or (B2)? (Circle one) Suppose A and B are two bonds with the same time to maturity. If the coupon rate of A is higher than that of B (TA >rb), then (iii) Is the price of A higher than the price of B? Yes or No (Circle one). Yes or (iv) Is the Macaulay duration of A higher than the Macaulay duration of B? No (Circle one)