Problem 1 Consider bonds A to E below. The market interest rate is 6% (APR, compounded semi-annually). A. 6 years to maturity and 4% coupon rate (coupons paid annually) B. 3 years to maturity and 7% coupon rate (coupons paid semi-annually) C. 6 years to maturity and 0% coupon rate (discount or zero-coupon bond) D. 3 years to maturity and 4% coupon rate (coupons paid semi-annually) E. 6 years to maturity and 4% 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. b) If you want to benefit from an unexpected decrease in market interest rates, which bond would you purchase?1 c) If you want to minimize interest rate risk, which bond would you purchase? d) What is the duration (in years) of the bond you chose in part c)?