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. FV = Coupon Payment = Number of payments = 3) You estimate that YTM is 6%. What is the price of the bond? Price of bond = 4) Now assume that the bond is callable at $950 in 6 years. If YTC is 5.5%, what is the price of the bond? 4) Now assume that the bond is callable at $950 in 6 years. If YTC is 5.5%, what is the price of the bond? Price of bond 5) Now assume again that the bond is NOT callable. What is the invoice price (i.e. dirty price) 2 month from now i.e. 2 months have passed and 4 months are left to receive interest payment? FV TM (PV/Total) X (TM) 6) What is the Macaulay Duration of this bond? Use the table below. Payment Coupon Total PV of CF .1 2 3 4 5 6 7 8 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% (ie dollar value of one basis point)? 8) What is the expected % change in bond price if YTM decreases from 6% to 9.25% (t.e, decrease by 0.75% or 75 basis points)? 9) What is the modified Duration for this bond? Good luck