Critically evaluate the rationale behind for selecting

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Reference no: EM133715661

Question 1. You are instructed by the Senior Finance Manager to evaluate the following bonds and offer your valuable recommendation: Coupon rate (annual Bond payments) A 0% B 0% C 4% D 8% Required: 1. 2. 3. Maturity (years) 15 10 15 10 Compute the percentage change in the price of each bond if its yield to maturity falls from 6% to 5%..

Based on your answer in part 1, (1) Assess the bond that 1s most sensitive to a 1% drop in interest rates from 6% to 5%.

(i1) Assess the bond that is least sensitive to a 1% drop in interest rates from 6% to 5%.

Based on your answer in part 2, critically evaluate the rationale behind for selecting such bond. Provide an intuitive explanation for your answer. Hint: you need to explain your answers based on part 2 (i) and (ii).

Reference no: EM133715661

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