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A 3 year government of Canada bond has a coupon rate of 5% and face value of $1000. Similarly a 2 year government of Canada
A 3 year government of Canada bond has a coupon rate of 5% and face value of $1000. Similarly a 2 year government of Canada bond has a coupon rate of 4% and a face value of $1,000. If the risk free rate is 3% and each bond has a risk premium of 2%,
a) what is the market price of each bond?
b) With respect to the bonds listed above. The yeild to maturity increases from 5% to 6%. What is the duration of each bond?
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