2) A bond that pays a coupon rate of 7.0%, has a par value of $1,000, matures in five years. This bond has a yield to maturity of 7.25%, pays semiannually and has a duration of 4.32 years.

a) Explain the concept of bond duration. Include a discussion of the part played by reinvestment risk and interest rate risk

b) Calculate the bond's modified duration.

c) Assuming the bond's yield to maturity decreases from 7.25% to 7.1%, estimate the both percentage change and the dollar price change of the bond.

d) Would the bond's price change be the same for a 0.20% increase in YTM as it would for a 0.20% decrease in YTM? Why or why not? What is this property of bond prices called?