You invest in a 3 year AA rated corporate bond. The bond has a face value of $100 and a coupon rate of 5% (paid annually). The AA corporate yield curve is flat at 5% (this implies a discount rate of 5% for all cash flows). Assume all shifts in the yield curve are parallel and that the distribution of 1 day changes in the rates are R_AA N(0, 0.0001) (Note: this means that they have mean zero and a standard deviation of 1%). Use the duration approximation to get the 10 day, 99% VaR for this bond. You should provide the bond price, duration and distribution of bond price changes as a minimum amount of working.

Hint: Remember that if X N(, ²), then c*X N( c*, c²*²) when c is a constant number.