Your colleague is constructing a table to calculate the duration of 5 year annual coupon paying bonds issued by American Expresso at an effective annual yield of 5% pa. The bonds have a face value of $135,000 and an effective annual coupon rate of 10% pa. Unfortunately your colleague is unwell and has taken the day off work. You have been asked to complete the calculations to present at a meeting.

a)Complete the table for your colleague. Give your answers to 4 decimal places.

Cash flow	Amount ($)	Present value of the cash flow (PVCF)	Weight (PVCF/price)
1	13,500	12,857.1429	0.0783
2	13,500	12,244.8980	0.0746
3	13,500	11,661.8076	0.0710
4	13,500	11,106.4834	0.0676
5

b)Calculate the duration (D) of the American Expresso 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:

A) increase B) decrease C) remain unchanged