A five-year bond with a yield of 9% (continuously compounded) pays a 6% coupon at the end of each year.

(a)What is the bond's price?

(b)What is the bond's duration?

(c)Use the duration to calculate the effect on the bond's price of a 0.2% decrease in its yield.

(d)Recalculate the bond's price on the basis of a 8.8% per annum yield and verify that the result is in agreement with your answer to (c).