You will have to pay a repayment of $5,000 at the end of each year for the next eight years. The current bond yield is 10.1%.

1. Find the present value and duration of the amount you owe. 2. How many years of zero-coupon bonds do you need to cover the cost of paying your repayments? What is the face value of this no-coupon bond? 3. How would your net position change if the bond yield suddenly fell to 9%? That is, what is the difference between the market price of your repayment and the zero-coupon bond?