Question: Suppose that zero interest rates with continuous compounding are as follows: Maturity Rate 0.5 Years 0.5 5.0 1 Years 1.0 5.4 1.5 Years 1.5 5.7

Suppose that zero interest rates with continuous compounding are as follows:

 Maturity Rate 0.5 Years 0.5 5.0 1 Years 1.0 5.4 1.5 Years 1.5 5.7 2 Years 2.0 5.9 2.5 Years 2.5 6.0 3 Years 3.0 6.1

A three-year bond pays an 6% coupon per annum paid semiannually.

a- Calculate the price of the bond?

b- Calculate the duration of the bond?

c- If the yield increase 0.2% calculate the price of the bond using duration?

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