1) A 4-year bond with a 3.5% coupon is at par. Calculate its duration.

2) Calculate its duration if its yield-to-maturity increases to 4%.

3) Back to the par case. What is its duration if it pays semi-annually?

4) What if it pays annually, but amortizes 50% at the end of year 3?

5) What is the Modified Duration of the original bond?

6)What is its dv01?

7) Using the dv01, how much will the bonds price change if its yield moves by 25 basis points in either direction?

8) Again using dv01, how much must the yield change in order to cause a price change of 1 (out of 100)? How about a price change of 1/32 (1 thirty-second of a point, or dollar)?

(**Extra Credit**): You own the above bond. Now calculate the dv01 of a 4-year zero coupon bond yielding 3.6%. How much of this zero bond would you need to sell short so that if the yield increases by 1% for both your bond and this zero, the gain from one offsets the loss from the other?