In the morning, the zero coupon curve was flat with all maturities yielding 5% p.a. continuous but by the evening of the same day, the same continuous yield had risen to 6% (continuous) for all maturities (a parallel shift).

A. What is the price of a two year annuity with cashflows of +1051.27, +1105.17 in years one and two only?

B. What was the duration of this annuity (in years)?

C. Given the 1% parallel shift in continuous rates, what arithmetic % return would you predict for the bond that day?