a. Find the duration of a 8% coupon bond making annual coupon pay- ments if it has three years until maturity and a yield to maturity of 12%.

b. If you wants to fully fund and immunize its position, how much of your portfolio should allocate to two year zero-coupon bonds and perpetu- ities, respectively, if these are the only two assets funding the plan?

c. How will these fractions change next year if your 8% coupon bond duration also drop one year?