Question: Question 1 I You are given two bonds for valuation and risk assessment. They mature in five years, have a principal, ie, par value of

Question 1 I You are given two bonds for valuation and risk assessment. They mature in five years, have a principal, ie, par value of 100 and coupons are paid annually. Bond Y Bond X 5% 8% Coupon rate Yield to maturity 8% 8% (a) Calculate the bond price and Macaulay duration for these two bonds, using a table. 16 marks (b) Malkiel's theorems describe the relationships between bond prices, maturities and yields. Explain three of these theorems. 6 marks (c) Using Malkiel's theorems, which bond should have a longer duration? 3 marks (Total: 25 Marks)

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