1.An insurance company is analysing three bonds and is using duration as the measure of interest rate risk. All three bonds trade at a yield to maturity of 10 per cent, have $10 000 par values, and have five years to maturity. The bonds differ only in the amount of annual coupon interest that they pay: 8, 10 and 12 per cent.

What is the duration for each five-year bond?

What is the relationship between duration and the amount of coupon interest that is paid? LO 6.1, 6.2