Determine the bond you should trade

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Question - As an aggressive investor, your investment objective is to maximize capital gains. You are considering to trade bonds. The information for the bonds available on the market is as follows:

Bond A with modified duration of 7.56 years with yield to maturity of 10%

Bond B with modified duration of 8.36 years with yield to maturity of 9%

Bond C with modified duration of 9.75 years with yield to maturity of 8%

If the bonds are alike in all other respects, determine the bond you should trade if you believe the market interest rates are going to decrease from current rate of 8% to 7.5% in the near future. Explain and provide a numerical evidence to support your answer.

Reference no: EM133035586

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