Consider the following bonds:

Bond............Coupon Rate (annual payments)...................Maturity (years)

A........................................ 0% ........................................ 15

B........................................ 0% ........................................ 10

C........................................ 4% ........................................ 15

D........................................ 8% ........................................ 10

a. What is the percentage change in the price of each bond if its yield to maturity falls from 6% to 5%?

b. Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 6% to 5% and why? Which bond is least sensitive? Provide an intuitive explanation for your answer.