2. Bill is a plumber who owns a Caterpillar bond with a $1,000 par value. The Caterpillar bond has a 4.00 percent coupon rate paid annually, three years remaining to maturity, a 6.00 percent yield to maturity, and a duration of 2.88 years. When the government releases new economic numbers tomorrow, Bill believes the interest rate (yield to maturity) on the Caterpillar bonds will increase by 80 basis points.

What is the current price of the Caterpillar bonds to two decimal places? Explain your answer.

What is the Caterpillar bonds current yield to two decimal places? Explain your answer.

What is the market value of Bills Caterpillar bond (if sold today, how much money does Bill get)? Explain your answer.

Assume Bills forecast is correct and the interest rate (yield to maturity) on the Caterpillar bonds increases by 80 basis points tomorrow.

What will be the Caterpillar bonds new yield to maturity to two decimal places? Explain your answer.

Using modified duration, what will be the new price of Caterpillar bonds to two decimal places? Explain your answer.

Assume Bill is wrong and the interest rate (yield to maturity) on the Caterpillar bonds decreases by 120 basis points.

What will be the Caterpillar bonds new yield to maturity to two decimal places? Explain your answer.

Using modified duration, what will be the new price of Caterpillar bonds to two decimal places?