Question 3

Danielle Motors bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8 percent. The bonds have a yield to maturity of 9 percent.

Required

1. What is the current market price of these bonds?

2. Compute the current yield

3. Compute the duration of the bond

4. Compute the modified duration and interpret your results