a. Fill in the table and determine the price and duration of a bond with a maturity of 5 years, $1000 face value, paying a 23.5% coupon annually, and trading at a yield to maturity of 3.68%? Fill in the cells of the table (8 Marks)

b. Use the duration of the bond that you have calculated above to predict the change in the bond price if interest rates rise by 100 basis points, then calculate the price of the bond after the change (6 Marks).

c. Assume that Michael Bank holds the bond in part a as its only asset, what is the duration gap if the ratio of total equity to total asset is 23%, and the duration of all its liabilities is 3.88 (4 Marks)

d. The management at Michael Bank would like to perform immunization. If the ratio of total equity to total asset, and the duration of all the liabilities are the same as those listed in part c and if they are both fixed, compute a new value of duration of all the assets so that immunization can be carried out. (4 Marks)