Today is 15 June 2018. Jing just purchased two Treasury bonds, henceforth referred to as bond A and bond B. Assume the yield rate for all these financial instruments is j2 = 3.75% p.a.

Bond A has the coupon rate of j2 = 3.15% p.a. and a face value of $100. The maturity date of this bond is 15 December 2020.

Bond B has the coupon rate of j2 = 3.35% p.a. and a face value of $100. The maturity date of this bond is 15 July 2022.

[5 marks] Calculate the duration and the modified duration of Treasury bondA. Give your answer in terms of years, rounded to three decimal places.

[4 marks] Calculate the price Jing paid for bond A. Then use the duration of bond A from part a to estimate its price if the market yield rate switches toj2 = 3.8% p.a. (rounded to two decimal places).

[6 marks] Calculate Jings purchase price of bond B using the RBA approach (rounded to three decimal places).