Consider a 10-year zero-coupon German government bond (Bund). This bond has a par value

of €100 and is priced at €69.9726 with a 3.65% yield.

a) Calculate the duration for this bond using the 3.65% yield.

b) What does your duration result mean for this bond?

c) What is the actual change in price for this bond if the yield increases by 100 basis points?

d) How does your duration estimate (a and b) compare with the actual price change (c)?

Assume an annual coupon payment frequency for your calculations. Explain your answer clearly and add comments where appropriate.