Question: Monica is certain that yields are going to fall dramatically in the coming weeks and would like to put on a trade to profit from

Monica is certain that yields are going to fall dramatically in the coming weeks and would like to put on a trade to profit from this view. She is limited by her $100 of capital and would like to make the most money by investing in one security. Her (risky) asset menu looks like the following:

(a) A 10-year, 8% annual, coupon bond with a price of $100

(b) A 5-year, 10% annual, coupon bond with a price of $100

Rank these three securities by their sensitivity to yield changes. (No need for mathematical justification)

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