An investment manager is considering which of two bonds to purchase . The first bond is a new type of bond called a peak intermediate term coupon ( PIT - C ) bond . It is a 5 - year bond with a $ 1000 face or par value . Coupon / interest payments are made annually but increase over time . The coupon interest rate is 2 % in year 1,4 % in years 2 and 3 and 6 % in years 4 and 5. The bond pays the face value at maturity . The yield to maturity ( YTM ) on the PIT-C bond is 5 % . Given this information :

1/ Calculate the duration of the PIT bond . Show your calculations.

2/ . Alternatively , the investment manager is considering investing in a more traditional corporate bond with a 6 - year bond with a duration equal to 4.23 years . Which bond , the PIT - C or the corporate bond , has more interest rate risk ? Briefly explain how you know .

3/ . Currently , some Wall Street analysts are expecting interest rates to rise by 75 basis points in the near future . Using duration , calculate the change in the price of the PIT - C bond if interest rates rise by 75 basis points . Show your work.