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2. Suppose a 5% coupon, 3 year bond is selling for $1010. The face value is $1000. The coupon is paid every six months. Answer

2. Suppose a 5% coupon, 3 year bond is selling for $1010. The face value is $1000. The coupon is paid every six months. Answer the following questions. (a) Calculate the yield to maturity of this bond. ( 7 marks) (b) Calculate the price of this bond if the yield to maturity increases by 1% with maturity unchanged. ( 7 marks). (c) Calculate the price of this bond if the yield to maturity decreases by 1% with maturity unchanged. (6 marks)

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