Which bond is sensitive to changes in the yield to maturity

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Suppose a business has three debt obligations outstanding. Bond A has a $1000 par value, a 5% annual coupon, and a 10-year maturity. Bond B is a zero-coupon bond with a $1000 par value and a 10-year maturity. Bond C has a maturity of 1 year, an annual coupon rate of 4%, and a par value of $100. Bond D is a zero-coupon bond with a $100 par and a 1-year maturity. The yield curve is flat, and the yield to maturity on all 4 bonds is 4% per year.

Problem 1: Find the price of each bond.

Problem 2: Suppose the yield to maturity falls to 3% per year. Find the price of each bond.

Problem 3: Find the percentage change in each bond price.

Problem 4: Which bond is the most sensitive to changes in the yield to maturity? Why

Reference no: EM132962577

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