1. You are considering the bonds of Epsilon, Inc., a printer manufacturer. The bonds make semiannual payments and have five years to maturity, a coupon rate of 6%, and a redemption value of $1,000.

a) Determine the intrinsic value of these bonds assuming that your required rate of return is 8% (use the PV function).

b) Determine the duration and modified duration

c) Now assume that the settlement date for your purchase would be 01/01/2018. Using the PRICE, YIELD, DURATION, MDURATION, recalculate your answers in parts (a) and (b).

d) Determine the percentage change in price if market rates decline by 1%. Determine the actual relative change in bond prices using the intrinsic values for each rate.