a) Find A and B. Round your answer to the nearest integer number.

The price of a risky 8-year zero-coupon bond depends on two parameters: risk-free 8-year spot rate (8) (to simplify notations, denote f (8) by r), and the risk factors and it is given by $1,000,000 P(r,s) = (1+0.5r+3rs-)16 Assume that today r=0.07 and s=0.4, so, today's bond price is P(0.07,0.4) = $1,000,000 (1+0.5*0.07+3*0.07*0.4^2)16 $345,905.35. You want to estimate the change in the bond's price using the first-order Taylor series approximation, i.e., write the change in price AP as a linear function of the change in the interest rate Ar and the risk factor As as AP=A*Ar+B*As, where A and B are some constants. The price of a risky 8-year zero-coupon bond depends on two parameters: risk-free 8-year spot rate (8) (to simplify notations, denote f (8) by r), and the risk factors and it is given by $1,000,000 P(r,s) = (1+0.5r+3rs-)16 Assume that today r=0.07 and s=0.4, so, today's bond price is P(0.07,0.4) = $1,000,000 (1+0.5*0.07+3*0.07*0.4^2)16 $345,905.35. You want to estimate the change in the bond's price using the first-order Taylor series approximation, i.e., write the change in price AP as a linear function of the change in the interest rate Ar and the risk factor As as AP=A*Ar+B*As, where A and B are some constants