2. Bill is a plumber who owns a Caterpillar bond with a $10,000 par value. The Caterpillar bond has a 4.50 percent coupon rate paid annually, three years remaining to maturity, a 6.50 percent yield to maturity, and a modified duration of 2.88 years. When the government releases new economic numbers tomorrow, Bill believes the interest rate (yield to maturity) on the Caterpillar bonds will decrease by 80 basis points. a. What is the market value of Bill's Caterpillar bond (if sold today, how much money does Bill get)? Explain your answer. b. What is the Caterpillar bond's yield-to-maturity to two decimal places? Explain your answer Assume Bill's forecast is correct and the interest rate (yield to maturity) on the Caterpillar bonds decreases by 80 basis points tomorrow. c. What will be the Caterpillar bond's new yield to maturity to two decimal places? Explain your answer. d. Using modified duration, what will be the new price of Caterpillar bonds to two decimal places? Explain your answer. Assume Bill is wrong and the interest rate (yield to maturity) on the Caterpillar bonds increases by 160 basis points. e. What will be the Caterpillar bond's new yield to maturity to two decimal places? Explain your answer. f. Using modified duration, what will be the new price of Caterpillar bonds to two decimal places? Explain your answer. 2. Bill is a plumber who owns a Caterpillar bond with a $10,000 par value. The Caterpillar bond has a 4.50 percent coupon rate paid annually, three years remaining to maturity, a 6.50 percent yield to maturity, and a modified duration of 2.88 years. When the government releases new economic numbers tomorrow, Bill believes the interest rate (yield to maturity) on the Caterpillar bonds will decrease by 80 basis points. a. What is the market value of Bill's Caterpillar bond (if sold today, how much money does Bill get)? Explain your answer. b. What is the Caterpillar bond's yield-to-maturity to two decimal places? Explain your answer Assume Bill's forecast is correct and the interest rate (yield to maturity) on the Caterpillar bonds decreases by 80 basis points tomorrow. c. What will be the Caterpillar bond's new yield to maturity to two decimal places? Explain your answer. d. Using modified duration, what will be the new price of Caterpillar bonds to two decimal places? Explain your answer. Assume Bill is wrong and the interest rate (yield to maturity) on the Caterpillar bonds increases by 160 basis points. e. What will be the Caterpillar bond's new yield to maturity to two decimal places? Explain your answer. f. Using modified duration, what will be the new price of Caterpillar bonds to two decimal places? Explain your
