Your colleague is constructing a table to calculate the duration of 5 year annual coupon paying bonds issued by American Expresso at an effective annual yield of 4% pa. The bonds have a face value of $105,000 and an effective annual coupon rate of 8% pa. Unfortunately your colleague is unwell and has taken the day off work. You have been asked to complete the calculations to present at a meeting.

a)Complete the table for your colleague. Give your answers to 4 decimal places.

Cash flow	Amount ($)	Present value of the cash flow (PVCF)	Weight (PVCF/price)
1	8,400	8,076.9231	0.0653
2	8,400	7,766.2722	0.0628
3	8,400	7,467.5694	0.0604
4	8,400	7,180.3552	0.0580
5

b)Calculate the duration (D) of the American Expresso bonds using the rounded values in the table. Give your answer in years to 2 decimal places.

D = years

c)If the yield were to decrease immediately, the duration of the bonds would:

increase decrease remain unchanged