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You have the following bond maturing in 7 years: Face Value = 1.000$; Annual coupons = 80$; Annual Interest rate= 6% 1/ Compute the PV

You have the following bond maturing in 7 years:

Face Value = 1.000$;

Annual coupons = 80$;

Annual Interest rate= 6%

1/ Compute the PV of the bond

2/ What will happen to the bond price if the interest rate increases to 8%?

3/ Compute both the duration and the modified duration of the bond

4/ Interpret your results in question 3

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