2. Estimate the DURATION of a par value 5-year, 20% coupon bond. Discount rate is also 20%. 3 4 1 Year 2 Coupon 20% PV % PV of Total Value 5 Weighted Maturity (1)*(4) 1 2 3 | | Duration= a. Interpret your results. What does duration tell you? i. Based on your estimated duration, what are the effect on the bond's price if interest rates go from 20% to 21%. Explain. %AP - :-DURG ii. If Duration is 4 years, how does affect the price of the bond? (Re-estimate the change in price with a 4-year duration in the formula above)