1. A 9-year bond has a yield of 10% and a duration of 7.194 years. If the market yield changes by 50 basis points, what is the percentage change in the bonds price?

2. Rank the durations or effective durations of the following pairs of bonds:
   1. Bond A is a 6% coupon bond, with a 20-year time to maturity selling at par value. Bond B is a 6% coupon bond, with a 20-year time to maturity selling below par value.
   2. Bond A is a 20-year noncallable coupon bond with a coupon rate of 6%, selling at par. Bond B is a 20-year callable bond with a coupon rate of 7%, also selling at par.

3. Prices of long-term bonds are more volatile than prices of short-term bonds. However, yields to maturity of short-term bonds fluctuate more than yields of long-term bonds. How do you reconcile these two empirical observations?

4. You predict that interest rates are about to fall. Which bond will give you the highest capital gain?

1. Low coupon, long maturity.
2. High coupon, short maturity.
3. High coupon, long maturity.
4. Zero coupon, long maturity.