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1) Assume you have a bond with a 10% coupon rate, a 2 year maturity, an 8% YTM, a par value of $1,000 and a

1) Assume you have a bond with a 10% coupon rate, a 2 year maturity, an 8% YTM, a par value of $1,000 and a semi-annual coupon.

A. What is the bonds annual modified duration?

B. Assuming a decline in bond yield (YTM) of 150 basis points what is the estimated change in price of the bond using modified duration?

No Excel calculation allowed. Show step-by-step solution with formulas used. Correct answer: Macaulay Duration Annual = 1.86 Modified Duration = 1.79 Estimated Price Change = $27.87

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