Question three A 3 years treasury bond shs100,000 par semi-annual bond pays a coupon of 5% p.a. It has a YTM of 8% p.a. and its issue price is shs 92,107.5 What is the duration? Required Convexity ( ) 100 2 1 100 100 * 2 D y y P P m 7 (i) Calculate the bond duration and interpret the result (ii) Calculate the modified duration and interpret the result (iii)If the interest rates increases from 5% to 6% what will happen to bond price. (iv)If the interest rates decreases from 5% to 4.5 % what will happen to bond price. (v) Explain the relationship between bond duration and its maturity