1) A two-year, $1,000 (i.e., face value) bond that pays an annual coupon of 10 percent and trades at a yield of 8 percent.

Calculate Macaulay duration.

[Tip: try to draw a timeline with cash flow information.]

Group of answer choices

0.5234

1.8545

2.0

1.7690

1.9106

2)

Assume the same information as in the previous question.

A two-year, $1,000 (i.e., face value) bond that pays an annual coupon of 10 percent and trades at a yield of 8 percent.

Calculate Modified Duration, and Dollar Duration.

Group of answer choices

1.6380 years; $1,696.37

1.8889 years; $1,956.25

1.769 years ; $1,832.08

1.769 years; $1,769.00

1.8519 years ; $1,917.89

3)

Assume the same information as in the previous question.

A two-year, $1,000 (i.e., face value) bond that pays an annual coupon of 10 percent and trades at a yield of 8 percent. What will be the change in price and the new price using the duration model if interest rates increase to 8.5 percent?

Group of answer choices

P = -$9.59 ; P = $990.41

P = -$9.59 ; P = $1026.07

P = -$9.16 ; P = $1026.50

P = -$8.85 ; P = $991.41

P = -$9.16 ; P = $990.84