Actuarial Question. Solve properly.

C Calculate the duration of the one-year, three-year and five-year bonds at a gross redemption yield of 5% per annum affective. (6) (18) Explain why a five-year bond with a coupor rate of 8% per annum would have a lower duration than a five-year bond with a coupon rate of 4% per annum 12) Four years after issue, immediately after the coupon payment then due the government is anticipating problems servicing its remaining debt. The government offers two options to the holders of the bond with an original term of five years: Option 1: the bond is repaid at 79% of its nominal value at the scheduled time with no final coupon payment being paid. Option 2: the redemption of the bond is deferred for seven years from the original redemption date and the coupon rate reduced to 1% per annum for the remainder of the existing term and the whole of the extended term. C Calculate the duration of the one-year, three-year and five-year bonds at a gross redemption yield of 5% per annum affective. (6) (18) Explain why a five-year bond with a coupor rate of 8% per annum would have a lower duration than a five-year bond with a coupon rate of 4% per annum 12) Four years after issue, immediately after the coupon payment then due the government is anticipating problems servicing its remaining debt. The government offers two options to the holders of the bond with an original term of five years: Option 1: the bond is repaid at 79% of its nominal value at the scheduled time with no final coupon payment being paid. Option 2: the redemption of the bond is deferred for seven years from the original redemption date and the coupon rate reduced to 1% per annum for the remainder of the existing term and the whole of the extended term