You purchase a 3-year corporate bond, which has a coupon rate of 8%, paid annually. Its par value is $1,000. The current YTM is 6%.

What will be the new price of the bond by using the duration model if the YTM increases by 50 basis points?

a. $1,039.60

b. $1,067.33

c. $985.82

d. $986.15

You are considering a 2-year, $40 million, corporate bond issued by Happy ally of America (HVA). The interest rate of HVA bond is 8%.

paid annually, and its YTM is 9%. What is the modified duration of HVA bond?

a. 1.36 years

b. 1.92 years

c. 1.48 years

d. 1.75 years