You are evaluating the following three bonds:

Bond	Face Value ($)	Coupon rate	Maturity (years)
A	1000	8%	5
B	1000	6%	10
C	1000	0%	10

Suppose the yield curve is flat at 7% for all maturities. Use annual compounding in this problem.

a) Without doing any math would Bond A and B be trading at a discount/premium? Justify your answer

b) Calculate the price for all three bonds. Is your answer from a) in line with your findings in b) for bond A and B?

c) Without doing any math, which bond would have the higher duration? Bond A or B? Explain why.

d) Calculate the Macaulay duration for Bond A and B. Is this in line with your expectation form c)?

e) There is no need to calculate duration for Bond C. Why/ What is its duration?

f) Say you need to create an immunising portfolio with a duration of 9 years. Show two ways how you could create an immunising portfolio using any combination of bonds A, B, and C. (4 marks)