1. Consider the following three bonds: Bond A: has two years to maturity, an 5% coupon rate with semi-annual payments, and a notional of 100. Bond B. has two years to maturity, an 8% coupon rate with semi-annual payments, and a notional of 100 Bond C: has two years to maturity, an 6% coupon rate with semi-anmal payments, and a notional of 100. Given also that the yields of bonds A, B and Care respectively 7.5%, 7.7% and 8.1%, swer the following questions: (a) Compute the prices of bonds A, B and C. [15] (b) Compute the duration of bonds A, B and C [15] (c) Which bond price is affected most by change in interest rates? Which bond price is affected the last Justify your answer (10) (d) Suppose you can buy and sell any number of the bonds A. B and at the prices you found in (a) Find an zubitrage opportunity for full marks, you must explain the payoffs at all relevant points in the (20) 1. Consider the following three bonds: Bond A: has two years to maturity, an 5% coupon rate with semi-annual payments, and a notional of 100. Bond B. has two years to maturity, an 8% coupon rate with semi-annual payments, and a notional of 100 Bond C: has two years to maturity, an 6% coupon rate with semi-anmal payments, and a notional of 100. Given also that the yields of bonds A, B and Care respectively 7.5%, 7.7% and 8.1%, swer the following questions: (a) Compute the prices of bonds A, B and C. [15] (b) Compute the duration of bonds A, B and C [15] (c) Which bond price is affected most by change in interest rates? Which bond price is affected the last Justify your answer (10) (d) Suppose you can buy and sell any number of the bonds A. B and at the prices you found in (a) Find an zubitrage opportunity for full marks, you must explain the payoffs at all relevant points in the (20)