Question 6 (Total 20 marks) Consider an annual bond with 3 years before maturity, which pays 8% annual coupon on the bond face value $100. The zero rates for one year, two years, and three years are 9%,10%, and 11% respectively. (a) Calculate the bond price. (4 marks) (b) Explain what bond yield is. Then, find which one of the following is the bond yield: 9.28%, 9.87%,10.42%,10.89%,11.12%, or 11.39% ? Show calculations. (4 marks) (c) Calculate the bond duration for this bond. (4 marks) (d) If you find from your market that the bond yield is higher than what you calculated above, by half a percentage point, how would you revise your bond valuation? (4 marks) (e) The "par yield of a bond" is defined to the coupon rate that makes the bond price equal to the bond par value. Calculate the par yield of a 3-year annual bond. (4 marks)