up-to-date with security updates, fixes, and Improvements, choose Check for Updates. de celeder die Ein 5. (15%) Bonds of Zella Corporation with a par value of $1,000 sell for $960, mature in five years, and have a 7% annual coupon rate paid semiannually. Compute the current yield and YTM. Hint: In what situation a bond can have current yield greater than YTM? I 6. (15%) On Jan 1, 2012, FIN307 is considering the newly issued 10-year AAA corporate bond, which is due Jan 1, 2022, with a coupon rate of 6% per year paid every 6 months. The bond is traded at par. Suppose the market interest rate declines by 100 bps (ie., 1%), what is the duration and modified duration (before interest rate changes) and the effect of the market interest decline on the bond price? Hint: Pls do not use your financial calculator "built-in" duration function to generate the number, because the financial calculator allowed by the department policy does not have that function at all. Please instead go to excel and do the calculation manually by setting up 6 columns for t (1, 2, 320), DF(discount factor or LPV factor), CF (cashflow), PV (present value of CF-CF DF), w(weight-PV/sum of PV or P), and tw. Then sum up all tw, then divide by 2 (because here coupon is paid semiannually) In your final test, you are asked to compute all numbers manually (of course, not 20, but likely 2-4, rows or periods). Also note that the bond pays coupon semi-annually. As a result, when you use change in P P-D x change in y/(1+y/2), here y is YTM in terms of APR, or (1-3%), NOT (1+6%), because the bond pays coupon semiannually