For a STRIP with three years to maturity and a yield to maturity of 2.0%,

i. What is the Macaulay duration of this STRIP?

ii. What is the modified duration of this STRIP (assume semi-annual compounding)? iii. An investor owns $100M (market value or price NOT face or par) of these STRIPS, what is the Dollar Duration of this position (measured in terms of a 100bp change)?

iv. What is the price elasticity of this STRIP for a 1bp increase in yield to maturity? b) For a semi-annual coupon bond with 4 years to maturity, an annual coupon of 8% (paid 4% each six month period), and a current yield to maturity of 3.5% (annual),

i. What is the Macaulay duration of this bond?

ii. What is the modified duration of this bond?

iii. An investor owns $50M (market value or price NOT face or par) of these bonds, what is the Dollar Duration of this position (measured in terms of a 1bp change NOT the usual 100bps)? iv. What is the price elasticity of this bond for a 1bp increase in yield to maturity? c) A bank is owed money from a local business; the money was used a few years ago to renovate the headquarters. The term loan has a fixed rate of interest and a yield to maturity of 8.0% (APR), quarterly payments of principal and interest each quarter are $7,508. The loan has 2 years (8 payments) remaining.

i. What is the Macaulay duration of this loan?

ii. What is the modified duration of this loan?

iii. The bank owns approx. $55K (market value or price) of this loan, what is the Dollar Duration of this loan (measured in terms of a 100bp change)?

iv. What is the price elasticity of the loan, given a 25bp change in annual yield to maturity (currently 8.0%)?

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