Rank these bonds according to interest rate sensitivity

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You must invest $100,000, and the bonds listed below from A to E are the only investments available today (assume that it is possible to buy a fraction of a bond in order to invest the full $100,000). The same 6% market interest rate (APR, compounded semi-annually) applies to all of these bonds and they have the following additional characteristics:

A. 3 years to maturity and 8% coupon rate (coupons paid semi-annually).

B. 5 years to maturity and 6% coupon rate (coupons paid annually).

C. 5 years to maturity and 6% coupon rate (coupons paid semi-annually).

D. 5 years to maturity and 0% coupon rate (zero-coupon bond).

E. 3 years to maturity and 6% coupon rate (coupons paid semi-annually).

a) Rank these bonds according to their interest rate sensitivities, from the most interest rate sensitive to the least interest rate sensitive.

Reference no: EM132468036

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