You are the financial manager of Zamzam pension fund. You are reviewing strategy regarding the fund. Over 60% of the fund is invested in fixed rate long-term bonds. Interest rates are expected to be quite volatile for the next few years.

Among the pension funds current investments is the following AAA rated bond: 3% Gilt June 2024 (interest is payable semi-annually) (i.e. The bond are redeemable in 15 years time) The current annual yield to maturity is 5%. The par value and redemption value of 100. Macaulay Duration 10.33 years

(a) Using the information provided, estimate the market value of the bond

(b) Using the information provided, calculate the modified duration of the bond

(c) Using the information provided and your answer to parts(a) and (b), calculate and discuss the projected price change for the bond if ;

(i) The yield to maturity for this bond declines by 250 basis points

(ii) The yield to maturity for this bond increase by 250 basis points