Assume a 5-year, $1,000 Treasury bond paying a 8 percent semiannual coupon and selling at par What is the duration for this bond? What is the modified duration of the bond? What is the dollar duration of the bond? Using the duration model, what will be the estimated new price of the bond if interest rates increase 0.10 percent? If rates decrease 0.75 percent?

What would the actual price be under each rate change situation in part (c) using the traditional present value bond pricing techniques?

What is the amount of error in each case?