The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The BIVA Bank purchased GHS 40 million of the bonds when the current yield of the bond was 15% on the market.

a) Calculatethedurationofthebond.[20marks]

b) An analyst with The BIVA Bank forecasts that the interest rate will rise by 0.5% next month. What is the percentage change in the price of the bond? [6 marks]

c) What is the cedi change in the price of the bond? Calculate the new price of the bond on the market. [6 marks]

d) Outline four (4) limitations of gap analysis. [