Question: 2. This question is one bond price sensitivity to changes in interest rates. a. Bond A has a face value of M=1000, a coupon rate

2. This question is one bond price sensitivity to changes in

2. This question is one bond price sensitivity to changes in interest rates. a. Bond A has a face value of M=1000, a coupon rate of 5\% paid semi-annually, and six months to maturity. (i) Find the price of the bond if the market rate of interest is 5%. (4 points) (ii) Find the price of the bond if the market rate of interest is 4.5%. (4 points) (iii) Compute the percent change in the bond's price. (2 points) %B0=OriginalB0ChangeinB0100 b. Bond B has a face value of M=1000, a coupon rate of 0%, and six months to maturity. (i) Find the price of the bond if the market rate of interest is 5\%. (4 points) (ii) Find the price of the bond if the market rate of interest is 4.5%. (4 points) (iii) Compute the percent change in the bond's price. (2 points) %B0=OriginalB0ChangeinB0100 c. Comparing bonds A and B, is the coupon rate relevant regarding sensitivity to changes in interest rates? Explain. (5 points)

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