Work the following problem term by term. Do not use the books formulas for bond prices or duration. They will not work for this problem without modification. Rather, calculate each term in the basic formulas, then add them to come up with the price or duration.

1. Suppose you have a 4.50% coupon bond with a ytm of 2.0 percent and a term-to-maturity of 3 years. The bond pays its coupon ANNUALLY (once per year) and has a face value of $1,000. What is this bonds price? What is its duration?

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