A 2-year bond with a yield of 5% (continuously compounded) pays a 3% coupon per annum payable semi-annually.

a) What is the bonds price?

b) What is the bonds duration?

c) Use the duration to calculate the effect on the bonds price of a 0.1% decreases in its yield.

d) Recalculate the bonds price on the basis of a 5.1% per annum yield and verify that the result is in

agreement with your answer to (c)