22. We have a simple balance sheet of a financial company as follows Bond 20 years Par=1 million, Bond 1 year maturiry Par=800,000 Capital Equity 200,000 Total Asset 1 million Total liab $ equity 1 million a. Suppose market yield increases, does this company gain or lose? Explain (hints: think about the effect of yield changes on valuation). b. How to reduce the risk, what is an immunization? A bond with par = $1million, coupon=10% per year, paid every semester, maturity=2 years. Current yield = 8%. Calculate the duration for this bond. If yield increases to 9%, calculate price change using the duration model and using direct bond valuation model (PV of cash flow)