Mr. Agarwal is considering to invest in the bond of Timbers Ltd. The bond has a credit

rating of A+ and was issued in October, 1996. The maturity of the bond is in October,

2004. The bond has a face value of Rs.1,000 and has a coupon of 15% payable semi-

annually. The current market price of the bond is Rs,950.

You are required to

a.

Calculate the current yield, yield to maturity (YTM) and the duration of the bond.

b.

Calculate the price of the bond, if the interest rate prevailing in the market decreases

by 200 basis points,