Hello tutors, Good afternoon for you. I have a case to discuss together, kindly I will combine with mine, can you give a formula to I know, thank you so much before sir, and madam.

The case is :

Your company asks you to manage a short-term guaranteed investment contract. The case is if I create a portfolio that has a 4-year duration.

(a) If you are given the choice of using a 5-year zero coupon bond and a 3-year 8% annual coupon

bond with a yield to maturity of 10%, how would you construct your portfolio?

(b) What is the modified duration of that 3-year annual coupon bond in (a)?

(c) If the yield to maturity of that 3-year annual coupon bond decreases to 8.045%, how much

percentage change in price would you expect to see using modified duration?