b$.$ A bond possesses a duration of $8\mathrm{.}89$ years. Suppose that market interest rates on

comparable bonds were $7\mathrm{.}5$ percent this morning, but have now shifted downward

to $7\mathrm{.}25$ percent. What percentage change in the bond's value occurred when interest

rates decreased by $25$ basis points? What advise will you have for the investor of

such bonds?

c$.$ The investments officer for Sillistine Savings is concerned about interest rate risk

lowering the value of the institution's bonds. A check of the bond portfolio reveals

an average duration of $4\mathrm{.}5$ years. How could this bond portfolio be altered in order

to minimize interest rate risk within the next year?