As part of your analysis of debt issued by Monticello Corporation, you are asked to evaluate two of its bond issues, shown in the following table.

a. Using the duration and yield information in the table above, compare the price and yield behavior of the two bonds under each of the following two scenarios:
i. Strong economic recovery with rising inflation expectations.
ii. Economic recession with reduced inflation expectations.
b. Using the information in the table, calculate the projected price change for bond B if its yield to maturity falls by 75 basis points.
c. Describe the shortcoming of analyzing bond A strictly to call or tomaturity

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Bond A (Callable) Bond B (Noncallable) Maturity Coupon Current price Yield to maturity Modified duration to maturity Call date Call price Yield to call Modified duration to call 2020 11 .50% 125.75 7.70% 6.20 2014 105 5.1 096 3.10 2020 7.25% 100.00 7.25% 6.80