Calculating Bond Value and Duration

Coupon Rate: 7.85%

Maturity: 10-Years

Coupon Frequency: Semi-Annual

YTM: 4.5%

1. Calculate the value of this bond, assume Face Value: $1,000

2. Calculate the Macaulay Duration

3. Calculate the "Duration"

4. Based on the duration calculation, estimate the percentage change in the value of the bond if YTM goes down to 4.25%.

5. Calculate the value of the bond when YTM: 4.25%, and calculate the actual percentage change in the value of the bond. Compare that to your estimate obtained using the duration.