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Question 3 (a) Are short-term bond prices less sensitive or more sensitive than long-term bond...

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Question 3 (a) Are short-term bond prices less sensitive or more sensitive than long-term bond prices to interest rate changes? Explain your answer. (2 marks) (b) A bond with a face value of RM1,000 pays coupon at 10% per annum. The required rate of return is 15%. Calculate the current value of the bond, if its remaining period to maturity is (i) 1 year (2 marks) 20 years (2 marks) (TOTAL = 6 marks)

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