3. A bond has a duration of 7.25 years. The bonds yield to maturity is 9%. The bond makes annual coupon payments.

a) Calculate the bonds modified duration.

b) If the bonds yield to maturity rises to 9.1%, what will happen to the bonds price? Use the modified duration to calculate the percentage change in the bonds price.

4. A bond has a duration of 12 years. The bonds yield to maturity is 10%. The bond makes annual coupon payments.

a) Calculate the bonds modified duration.

b) If the bonds yield to maturity falls to 9%, what will happen to the bonds price? Use the modified duration to calculate the percentage change in the bonds price.

5. In comparing problems 3 and 4 above, which prediction for the bonds price will be more accurate: problem 3 or problem 4? Why?