CFA Problem Day 1 Preparation for Test 1 1. On May 30, 2023, Janice Kerr is considering one of the newly issued 10-year AAA corporate bonds shown in the following exhibit. Each bond pays interest semiannually. Description Bissell, due May 30, 2033 Hatfield, due May 30, 2033 Coupon 6.20% 6.00% Price Callable Call Price 100 Yes 106 100 No Note: Bonds are quoted in percentage of par, so 100 means that the bond is trading for $1000. Please assume that interest is paid semiannually. a. Suppose that market interest rates decline by 1%. Contrast the effect of this decline on the price of each bond. b. Should Kerr prefer the Bissell or Hatfield bond when rates are expected to fall? c. Suppose that market interest rates instead rise by 1%. Contrast the effect of this rate increase on the price of each bond. Should Kerr prefer the Bissell or Hatfield bond when rates are expected to rise?