Fv = 1000

The face value of the bond will be 1,000

Coupon payment will be as follows:

= 5% / 2 x 1,000

= 25

Number of payments will be as follows:

= 10 x 2

= 20

The price of the bond will be as follows:

Bonds Price = Coupon payment x [ [ (1 - 1 / (1 + r)ⁿ ] / r ] + Par value / (1 + r)ⁿ

r will be as follows:

= 6% / 2

= 3%

So, the price will be as follows:

= $ 25 x [ [ (1 - 1 / (1 + 0.03)²⁰ ] / 0.03 ] + $ 1,000 / 1.03²⁰

= $ 25 x 14.87747486 + $ 553.6757542

= $ 925.61

You are an investment advisor and your client would like you to explore investing in bonds. 1) Your investor has found the following semi-annual bond quotation 10 year, 5% 2) He is wondering about the following: Face Value, Coupon Payment, Number of Coupon Payments. 6) What is the Macaulay Duration of this bond? Use the table below. Payment # Coupon FV Total PV of CF TM (PV/Total) X (TM) 1 2 3 4 5 6 7 00 9 10 11 12 13 14 15 16 17 18 19 20 Total = Macaulay Duration = 7) What is the Dollar Value of a 0.01% (i.e. dollar value of one basis point)? 8) What is the expected % change in bond price if YTM decreases from 6% to 5.25% (i.e. decrease by 0.75% or 75 basis points)? 9) What is the modified Duration for this bond