Question: Question 3. (1000 words maximum, 30 marks in total) a) By showing your calculations, justify which bond will be more sensitive to interest rate changes:

Question 3. (1000 words maximum, 30 marks in total) a) By

Question 3. (1000 words maximum, 30 marks in total) a) By showing your calculations, justify which bond will be more sensitive to interest rate changes: Par value Term to maturity Annual coupon rate Frequency of coupon payment per year Yield of bonds in similar risk class Bond A 1,000 5 years 4% Twice 4% Bond B 1,000 5 years 5% Once 8% (10 marks)

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