Question 4 (16 points) Bond Valuation: (10 marks) a) Exactly 2 years ago, you purchased at par a 10-year, 10 percent coupon bond, with a face value of $1000 that pays interest annually. Today, the market rate of interest is 6%. (i) What was the market rate of interest at the time you purchased the bond? (1 mark (ii) Suppose you wish to sell the bond today, how much can you sell if for? (3 marks) (iii) What is your rate of return on the bond if all coupons were reinvested in your bank account, which pays 1% interest per year until the bond is sold 2 years after owning it? (3 marks) b) Why are long-term bonds more sensitive to changes in interest rates than short- term bonds? (3 marks)