. A 5-year 10% coupon bond is selling to yield 8%. The bond pays interest annually. The redemption value of the bond is at par.

a. What is the price of the 5-year 10% coupon bond selling to yield 8%? (2 marks)

b. What is the price of this bond one year later assuming the yield is unchanged at 8%? (3 marks)

c. What is the price of this bond if yield has increased from 8% to 12%? Also calculate the price of this bond one year later assuming the yield is 12%.