) Suppose a bond has 10 years to maturity, a coupon rate of 6% and a face value of $100 selling at 7% yield to maturity where coupon payments are made every 6 months.

a) Calculate the price of the bond

b) Holding all else equal, if a firm becomes more risky will the yield to maturity of the bond increase or decrease? For full credit explain why.

c) Use modified duration to approximate the change in price when yield to maturity decreases to 5%.