1. A bond with $1,000 face value, 10% coupon, market interest rates of %5, and 10 years to maturity.

1. Calculate the duration of the bond. Show calculation.
2. Assume that market interest rates increased to 10%, re-calculate the duration of the bond
3. Comment generally on the relationships between the interest rates, coupons, and duration

2. A $1000 face value bond has a 10% coupon rate, its current price is $950, and its price is expected to decrease to $850 next year. Calculate the return of the bond.