Bonus Problem 2 (Optional, 20 marks) You are given the following information about two coupon bonds (Bond A and Bond B) in the market: Bond term Face value Redemption Coupon Market value rate price (Frequency) Bond A n years 1400 1500 (not given) 1530.9 Bond B 2n years 1400 1500 (not given) 1420.5 (*Note: Assume that n 5) After 3 years, the market price of bond A is less than the market price of bond B. It is also given that the annual effective yield rate of bond B remains unchanged. What can you say about the annual effective yield rate of bond A after 3 years? Provide mathematical argument to justify your answer. (A) The annual effective yield rate of bond A has increased after 3 years (B) The annual effective yield rate of bond A has decreased after 3 years (C) The annual effective yield rate of bond A remains unchanged after 3 years Bonus Problem 2 (Optional, 20 marks) You are given the following information about two coupon bonds (Bond A and Bond B) in the market: Bond term Face value Redemption Coupon Market value rate price (Frequency) Bond A n years 1400 1500 (not given) 1530.9 Bond B 2n years 1400 1500 (not given) 1420.5 (*Note: Assume that n 5) After 3 years, the market price of bond A is less than the market price of bond B. It is also given that the annual effective yield rate of bond B remains unchanged. What can you say about the annual effective yield rate of bond A after 3 years? Provide mathematical argument to justify your answer. (A) The annual effective yield rate of bond A has increased after 3 years (B) The annual effective yield rate of bond A has decreased after 3 years (C) The annual effective yield rate of bond A remains unchanged after 3 years