You have constructed a table to calculate the duration of 2 year coupon paying bonds issued by Earth Bank at a yield of 6% pacompounded half-yearly. The bonds have a face value of $185,000 and a coupon rate of 4% pa compounded half-yearly. You printed up the table so that you could take it to a meeting, but unfortunately the final row has been cut off the printout.

a)Complete the table. Give your answers as decimals to 4 decimal places.

Cash flow	Amount ($)	Present value of the cash flow (PVCF)	Weight (PVCF/price)
1	3,700	3,592.2330	0.0202
2	3,700	3,487.6049	0.0196
3	3,700	3,386.0241	0.0190
4

b) Calculate the duration (D) of the Earth Bank bonds using the rounded values in the table. Give your answer in years to 2 decimal places.

D = __ years

c) If the yield were to decrease immediately, the duration of the bonds would:(choose one)

increase decrease remain unchanged