Q8) (10 Points) A bond issued several years ago has 6 years to maturity. Its duration is 5.211681. In terms of bond value sensitivity, if rates were 0.10% higher, the Bond would trade at $1,102.586368 and if they were 0.10% lower the Bond would trade at $1,114.139036. Your colleague uses regression analysis to generate Key Rate Durations (KRDs) s follows: KRD Regression Statistics Index Vol R? 1.0000 Intercept 0.0000000 KRD 1 (0.0419717) KRD 2 (0.0804181) KRD 3 (0.1139467) KRD 4 (0.1635074) KRD 5 (0.1853961) F Test 169,333 SSE 0.00002 Obs 30 a) Estimate the KRD for the 6th year b) If rates for year 1 and 2 are expected to increase by 0.10% at each point, drop by 0.20% for year 3 and 4 at each point, increase 0.50% at year 5 and drop 0.60% at year 6, what is the estimated percentage change in the value of the bond? Q8) (10 Points) A bond issued several years ago has 6 years to maturity. Its duration is 5.211681. In terms of bond value sensitivity, if rates were 0.10% higher, the Bond would trade at $1,102.586368 and if they were 0.10% lower the Bond would trade at $1,114.139036. Your colleague uses regression analysis to generate Key Rate Durations (KRDs) s follows: KRD Regression Statistics Index Vol R? 1.0000 Intercept 0.0000000 KRD 1 (0.0419717) KRD 2 (0.0804181) KRD 3 (0.1139467) KRD 4 (0.1635074) KRD 5 (0.1853961) F Test 169,333 SSE 0.00002 Obs 30 a) Estimate the KRD for the 6th year b) If rates for year 1 and 2 are expected to increase by 0.10% at each point, drop by 0.20% for year 3 and 4 at each point, increase 0.50% at year 5 and drop 0.60% at year 6, what is the estimated percentage change in the value of the bond