Question: Problem 3 (Required, 25 marks) Instruction: Choose the best answer for each of the following questions and provide explanations to your answer. (a) You are

Problem 3 (Required, 25 marks) Instruction: Choose the best answer for

Problem 3 (Required, 25 marks) Instruction: Choose the best answer for each of the following questions and provide explanations to your answer. (a) 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 > 10) Question: After 3 years, the market price of bond A is less than the market price of bond B. It is also given that the yield rate of bond B remains unchanged. What can you say about the yield rate of bond A? (A) The yield rate of bond A has increased after 3 years (B) The yield rate of bond A has decreased after 3 years (C) The yield rate of bond A remains unchanged after 3 years

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