Question: 2. Consider two bonds . Bond A has just been issued. Its face value is $1,000, it bears the current market interest rate of 4%,

2. Consider two bonds. Bond A has just been issued. Its face value is $1,000, it bears the current market interest rate of 4%, and it will mature in 10 years. Bond B was issued 5 years ago, when interest rates were higher. This bond has $1,000 face value and bears a 8% coupon rate. When issued, this bond had a 15-year maturity, so its remaining maturity is 10 years. Assume annual interest payments and an 8 percent yield to maturity on the bonds. The settlement date is 3rd February 2019 and maturity date is 3rd February 2029. Using Excel obtain the Duration of bond A and bond B by

Required

i. Computing and summing the discounting cash flows ii. Using the Excel function DURATION iii. Giving reason, which bond has longer duration.

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