Question: Finance 104F 18. Suppose a 5-year bond with a yield of 6% (continuously compounded) pays an 8% coupon at the end of each year, and

Finance 104F

18. Suppose a 5-year bond with a yield of 6% (continuously compounded) pays an 8% coupon at the end of each year, and the bond's principal is 200.

(1) Calculate the bond's price and duration.

(2) If a decrease of yield to 5.7%, calculate the bond's price using duration.

(3) If a decrease of yield to 5.2%, calculate the bond's price using duration and convexity.

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