You are working with "MADABA" company as a financial and investment analysis. MADABA co is considering an investment in MADEKE Co Bunds. The company plans to hold the bonds for only one year before selling them in the secondary market. MADEKE Co bonds are redeemable at a $2\%$ premium in five years.

Additional details of MADEKE's bonds are given below;$-$

Bond per value

Coopon rate $($Annually$)$

Tshs$.10,000,000$

Modified duration

$10\%$

To current

$10\%$

$3\mathrm{.}79$ year

Required

i$)$ Estimate the market price of MADABA co bond

ii$)$ Estimate the new bond price and the capital gain or loss upon selling the bond one year later if the

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market interest rate decreases from $10\%$ to $8\%$

iii$)$ Comment on the relationship between bond price and market interest rate?