An investor is considering purchasing a Treasury bond with 2 years remaining until maturity, a 6 percent coupon and a 5.35 percent required rate of return. The bond pays interest semiannually.

a. What is the Macaulay duration of this bond?

b. If annual promised yields decrease by 20 basis points, what is the predicted price change in dollars based on the bonds duration?

c. Imagine if the bond instead paid zero coupon but was otherwise identical (2 years until maturity and a 5.35% required yield.) What is the duration of this bond? What price will this bond sell for today?