Company A is going to issue some three-year bonds which have a face value of 10,000. The coupon rate is 10%, which is paid semi-annually. The prevailing yield-to-maturity rate for bonds with similar risk on the market is 6%.

Required:

1. Calculate the bonds market value and duration.
2. Copa PLC is considering some alternatives, which keep the face value at 10,000 and the maturity of three years, but change the coupon payment:
   1. Option 1: paying no coupon.
   2. Option 2: paying 10% coupon annually.

Recalculate the market value and duration of the bond for each of the option. Which option would result in a most volatile bond?