1. Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions:

1. Discuss which bond will trade at a higher price in the market
2. Discuss what happens to the market price of each bond if the interest rates in the economy go up.
3. Which bond would have a higher percentage price change if interest rates go up?
4. Please substantiate your argument with numerical examples.
5. As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy?