Please answer highlighted question #3.

B G The Excel immunization model allows you to analyze any number of time period or holding-period immu- nization examples. The model is built using the Excel-supplied formulas for bond duration, which allow the investigation of any maturity bond without building a table of cash flows. In these calculations, the coupon period is assumed to be annual. CTD H 1 Holding Period Immunization 2 3 YTM 0.0800 Mar Price 1000.00 4 Coupon rate 0.0800 5 Maturity 6 Duration 4.993 6 Par value 1000.00 7 Holding period 5 8 Duration 4.9927 9 10 11 If rates increase by 200 basis points If rates increase by 100 basis points 12 Rate 0.1000 Rate 0.0900 13 FV of CPS 488.41 FV of CPS 478.78 14 Sales price 981.82 Sales price 990.83 15 Total 1470.23 Total 1469.60 16 IRR 0.0801 IRR 0.0800 17 18 19 20 If rates decrease by 200 basis points 21 Rate 0.0600 22 FV of CPS 450.97 23 Sales price 1018.87 24 Total 1469.84 25 IRR 0.0801 If rates decrease by 100 basis points Rate 0.0700 FV of CPS 460.06 Sales price 1009.35 Total 1469.40 IRR 0.0800 Excel Questions 1. When rates increase by 100 basis points, what is the change in the future sales price of the bond? The value of reinvested coupons?| 2. What if rates increase by 200 basis points? 3. What is the relation between price risk and reinvestment rate risk as we consider larger changes in bond yields