You are given two bonds for valuation and risk assessment. They mature in five years, have a principal, i.e. par value of 100 and coupons are paid annually.

	Bond X	Bond Y
Coupon rate	5%	8%
Yield to maturity	8%	8%

1. Calculate the bond price and Macaulay duration for these two bonds, using a table.

16 marks

b. Malkiels theorems describe the relationships between bond prices, maturities and yields. Explain three of these theorems.

6 marks

c. Using Malkiels theorems, which bond should have a longer duration?

3 marks

(Total: 25 Marks