Question 1

A government bond currently carries a yield to maturity of 6.6 percent and a market price of $1,099.47. If the bond promises to pay $90 in interest annually for five years, what is its current duration?

Please show your work. Write your answers with two decimal points

Question 2

Miller financial firm holds a bond in its investment portfolio whose duration is 20 years. Its current market price is $1,050.40. While market interest rates are currently at 6.5 percent for comparable quality securities, a decrease in interest rates to 6.2 percent is expected in the coming weeks. What changes (in percentage terms) will this bonds price experience if market interest rates change as anticipated? [Alert: watch its sign + or -]

Please show your work. Write your answers with two decimal points