9. A 5-year bond with YTM of 12% and par value of $1000 pays an 8% annual coupon. 9.1 What is the bond's price? 9.2 What is the bond's duration? 9.3 Use the duration to calculate the effect of 0.2% increase in the market interest rate on the bond's price. 9.4 Recalculate the bond's price on the basis of a 12.2% YTM. 10. Construct profit diagrams or profit tables on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investor's objectives described below. Assume IBM currently sells for $150 so that profit tables for stock prices between $100 and $200 (in $10 increments) are appropriate. Also assume that "at the money" puts and calls cost $15 each. An investor wants upside potential if IBM increases but wants (net) losses no greater than $15 if prices decline. Page 2 of 3 An investor wants to capture profits if IBM declines in price but wants a guaranteed limited loss if prices increase. An investor wants to profit if IBM's upcoming earnings announcement is either unexpectedly good or disappointingly bad. An investor already owns IBM (at a price of $150) and wants to protect against price declines but wants to retain upside if prices rise. Only one transaction is permitted here. 11. Suppose a European call option has an exercise price of $100 and the underlying stock has a price of $100. The stock will pay no dividends over the next year. The option expires in 1 year and the continuously compounded interest rate is 6%. > Is the call option in-the-money, at-the-money or out-of-money? What will the option be worth on expiration if the stock price in 1 year is $110? What if the stock price is $90? Will the value of the option be larger or smaller if the volatility of the underlying asset is higher than otherwise? Will the value be larger or smaller if the option has 3 months rather than 6 months to expiration? Suppose there is a European put option on the same underlying stock that that has an exercise price of $100 and expires in 1 year. What's the price of the put option if the price of the call option is $6.5