Question 3: (25 marks) A five-year bond with a yield of 11\% (continuously compounded) pays an 8% coupon at the end of each year. The face value is $1000. a) Calculate the price of the bond [ 4 marks] b) Calculate the duration of the bond in years [ 4 marks] c) Use the duration to calculate the effect on the bond's price of a 1% decrease in its yield. [4 marks] d) Use the convexity to calculate the effect on the bond's price of a 1% decrease in its yield. [4 marks] e) Calculate the new price of the bond following a 1% decrease in yield using the bond pricing formula. [4 marks] f) Interpret your answers above. Write about 2 sentences for each part i.e. (a), (b), (c), (d)