(a) Suppose you hold a bond, and the current one-year holding period rate of return is 6%. And we further know that the yield to maturity for this bond is also 6% now. Could you tell me which rate will be higher if the interest rate decreases? Why?
(b) Suppose there are two bonds with the same yield-to-maturity and date to mature; but one is sold at premium, the other one is sold at discount. Could you tell me which bond has a higher coupon? Why?
(c) Is there any difference in prices between these two bonds mentioned in (b) at the end of their duration? Why?
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