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The following table shows the information of payment for the two seven-year bonds: Bond A & Bond B. We assume a yield to maturity of 4% a year. Bond A: The yield to maturity is 4% Year 1 2 3 3 4 5 6 7 S90 Payment $90 $90 $90 $90 590 $1,090 Bond B: The yield to maturity is 4% Year 1 2 3 4 5 6 7 Payment $30 $30 $30 $30 $30 S30 $1,030 (1) True or false: Because the two bonds both have the same final maturity. Therefore, we have said that a change in interest rates has an equal effect on the price of the two bonds. (2) Please calculate the present value of Bond A at year 0. (3) Please calculate the present value of Bond B at year 0. (4) Please calculate the duration (in years) of Bond A at year 0. (5) Please calculate the duration (in ycars) of Bond B at year 0. For bond A, at year o, how much (in %) will the bond value change if the YTM change 1%? (hint modified duration) (7) For bond B. at year 0, how much (in %) will the bond value change if the YTM change t%? (hint modified duration) (8) Following your calculation of (a)-(9), do the two bonds bear the same interest rate risk?(at year 0) Please explain. Checkpoint 2 Worked-out solution available at LarsonAppliec Determine the open intervals on which the graph of f(x) = x 12 x + 4 is concave upward or concave downward