Question: You need to show/write/explain inputs to your computations to get full credit. For each of the questions below, draw the time line where needed. Show

You need to show/write/explain inputs to your computations to get full

You need to show/write/explain inputs to your computations to get full credit. For each of the questions below, draw the time line where needed. Show all your work. Write the formula and show what you plugged in. Upload a single pdf copy to Blackboard. Question 1 (10 points, Chapter 6 and 7): Bond Prices and Stock Prices a. Bond Prices and Credit Risk (i) Suppose you purchase $1000 face-value of each of the following two bonds. Bond A: 3% Coupon rate, Treasury Bond, with semi-annual coupon payments, 30-year maturity and yield to maturity 4% quoted as an APR with semi-annual compounding. Bond B: Ford Motor 6% Coupon, with semi-annual coupon payments, 10-year maturity and a spread of 2% over the 30-year Treasury Bond yield, quoted as an APR with semi-annual compounding. Compute the price of Bond A and Bond B. Draw a graph that illustrates how the price of each of the bonds will change until maturity assuming no change in their yields to maturity. If the yield to maturity of both bonds increase by 1% right after the purchase, by what percentage do Bond A and Bond B prices change? Which bond price is more sensitive to interest rate changes and why

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