(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?

(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.

(c) Based on the results derived from Q5 (b), if Michael Bank needs to hold the bond for five days, what is the potential loss for the holding period.