As a financial security analyst consider a Bond X that has just been issued. Its face value is $1,000, it bears the current market interest rate of 5%, and it will mature in 10 years. Bond Y was issued 5 years ago, when interest rates were higher. This bond has $1,000 face value and bears a 7% coupon rate. When issued, this bond had a 15-year maturity, so its remaining maturity is 10 years.Assume annual interest payments and a 9 percent yield to maturity on the bonds. The settlement date is 3^rdMay 2019 and maturity date is 3^rdMay 2029.

a)Calculate the duration of bond X and bond Y by

i.Computing and summing the discounting cash flows

ii.Using the Excel function DURATION. Interpret your results

b)Which bond has longer duration? Give reason.

c)Giving the reason, comment whether the twobondsare selling at a premium or loss.