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Which bond would have a higher percentage price change

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Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions :

Problem 1: Discuss which bond will trade at a higher price in the market

Problem 2: Discuss what happens to the market price of each bond if the interest rates in the economy go up.

Problem 3: Which bond would have a higher percentage price change if interest rates go up?  Please substantiate your argument with numerical examples.

Problem 4: As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy?

Reference no: EM132663460

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