a.7. An FI purchases at par value a $100,000 Treasury bond paying 10 percent interest with a 7.5 year duration. If interest rates rise by 4 percent, calculate the bond's new value.

Recall that Treasury bonds pay interest semiannually. Use the modified duration valuation equation

b.Calculate the duration of a two-year corporate bond paying 6 percent interest annually, selling at par. Principal of $20,000,000 is due at the end of two years.