You expect the interest rates will contribute to rise from some time due to strengthening economic activity and rising inflationary expectations. Please determine for each part which of the two bonds you should purchase and justify your answer.
1. Bond A is a 6% coupon bond, with 30 years to maturity, selling below the par value.
Bond B is a 6% coupon bond, with 30 years to maturity, selling above the par value.
2. Bond C is a 4% coupon bond, with 30 years to maturity, selling at par value.
Bond D is a 4% coupon bond, with 20 years to maturity and 5% YTM.
3. Bond E is a 15 year STRIP with 7% YTM.
Bond F is a 3% coupon bond, with 10 years to maturity, selling at par.
*STRIP bond is a zero coupon bond issued by the Federal government.