You are holding an 8 year zero coupon bond, a 25 year zero coupon bond and a 10 year 18% coupon rate bond. The face value of each of the bonds is 100. The yield curve is flat at 3.3%.

(a) What is the price of each of the three bonds? (b) What is the duration of each of the three bonds? (c) You are concerned that interest rates interest rates will increase to 3.75%. Using duration analysis, what do you estimate the price change (in percent) will be for each of the three bonds if rates increase to 3.75%? What do you estimate the price will be for each of the three bonds if rates increase to 3.75% using duration analysis? (d) If you price the bonds as the present value of the future cash flows, what will the price of the three bonds actually be if rates increase to 3.75%? (e) If you expect that interest rates will increase to 3.75% and you want to invest all of your money into one of the bonds, which bond should you choose? Why? (f) If you expect interest rates to fall to 2.7% and you want to invest all of your money into one of the bonds, which bond should you choose? Why?