2 SECTION I: YOU CAN’T HANDLE THE TRUTH!!! OR MAYBE YOU CAN Questions 1-4 (20 points total) True or False, Explain: (20 points total –5 points each question) Use the following information to determine whether the statements are true or false. Check the appropriate box. If the statement is false AND ONLY if it is false provide a BRIEF explanation as to why it is false (BRIEF means AT MOST a few sentences). Show work if necessary. 1.All of the bonds below are compounded semi-annually and all have a face value of $1,000. If the YTM immediately increases by 200 basis points, Bond A MUST have the LARGESTpercentage decrease in price. Bond A.20 year zero coupon bond of a consumer products company which has a bond rating of AA- Bond B.5 year bond trading at a premium to par with a coupon rate of 6% which was upgraded to A+ last year Bond C.2 year bond trading at a discount to par with a coupon rate of 10%, and a bond rating which had been downgraded 3 notches to BBB+ four months ago. 2.All of the bonds below are compounded semi-annually and all have a face value of $1,000. Bond C MUST sell for the highest price.