1.The duration of an 11-year, $1000 Treasury Bond paying a 10 per cent semi-annual coupon and selling at par has been estimated at 6.763 years.

What is the modified duration of the bond? What is the dollar duration of the bond?

What will be the estimated price change on the bond if interest rates increase 0.10 per cent (10 basis points)? If rates decrease 0.20 per cent (20 basis points)?

What would the actual price of the bond be under each rate change situation in part

(b) using the traditional present value bond pricing techniques?

What is the amount of error in each case? LO 6.1, 6.3, 6.4