This is your first week at a mutual fund as an analyst. Your boss asked you to evaluate price risk of two 30-year bonds Bond A and Bond B. You have to complete the following tasks in order to prepare a report by 11:59 p.m. 10/05/2017. Bond A has a coupon rate of 3%, while bond B has a coupon rate of 14%. Both bonds pay their coupons semi-annually. A) Construct an Excel spreadsheet showing the prices of each of these bonds for yields to maturity ranging from 1% to 15% at intervals of 1%. Column A should show the yield to maturity (ranging from 1% to 15%), and columns B and C should compute the prices of the two bonds (using Excels PV function) at each interest rate.

B) In columns D and E, compute the percentage difference between the bond price and its value when the yield to maturity is 8% (initial yield to maturity) for bonds A and B, respectively [ = {(Price (at current ytm) Price (at initial ytm of 8%)}/ Price (at initial ytm of 8%)].

C) Plot the values in columns D and E (y-axis) as a function of the interest rate (x-axis). Which bonds price is proportionally more sensitive to interest rate changes?

S 1,000.00 ace value Coupon rate bond A Coupon rate bond B Time Initial Yield to maturi 3.00% 14.00% | 30.00 years 8.00%