CB-W rated corporation has issued debentures each with a face value of $1,000 with a fixedinterest annual coupon of 9 %t per annum and a maturity of 3 years. The debenture current quote is $1,080.19 a) Show that the market yield on the bond is 6%. (4 marks) b) What is the duration for the above bond? (4 marks) c) You are expecting the Reserve Bank of Australia to change interest rates to 5%. Using the duration method what will be the new price of the bond? (2 marks) Note: If you did not answer (b) use a duration of 2.5 years.

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