For this question please note:

This question is to be done on a spreadsheet with the results pasted and submitted in a Word document. Make sure that you show all your working for example, do not simply put down the covariance but show how it was obtained (this does not mean giving the Excel algorithm either!). Please do not give cell formulae, cell references, etc., as the reader should be able to follow from a table and do not use any excel formula to calculate standard deviation, covariance etc. This will not be acceptable.

You are a Bond Fund Manager of a superannuation fund. You are considering investing $2,800,000 on bonds issued by Just Kids Limited, a childrens toy manufacturing company. The 8-year bonds have a coupon rate of 10% pa with semi-annual coupon payments and face value of $1,000 each.

Calculate the duration of the bonds. 8 marks