(a) Suppose that Michael Bank holds a 8-year zero-coupon bond with a yield of 6.4% and a market value of 1 million. The standard deviation of the bond is 10 basis points. What is the duration of the bond? (1 marks) I I I (b) Based on the results derived from Q5 (a), what is the Daily Earnings at Risk (DEAR) for the bond as stated in part (a)? Assuming normality, 90% of the time yield changes will be within 1.65 standard deviations of the mean, however, suppose we only consider about the bad side, that is, there is a 5% chance of the yield change being exceeded in one tail of the distribution. (10 marks) (a) Suppose that Michael Bank holds a 8-year zero-coupon bond with a yield of 6.4% and a market value of 1 million. The standard deviation of the bond is 10 basis points. What is the duration of the bond? (1 marks) I I I (b) Based on the results derived from Q5 (a), what is the Daily Earnings at Risk (DEAR) for the bond as stated in part (a)? Assuming normality, 90% of the time yield changes will be within 1.65 standard deviations of the mean, however, suppose we only consider about the bad side, that is, there is a 5% chance of the yield change being exceeded in one tail of the distribution. (10 marks)