3. [4 marks] On your sheet labelled Part c do the following. Consider the move in yield from i0 = 7% to i1 = 5%. By adjusting our approximate formula for modified duration, calculate the (approximate) duration of each of the three Treasury bonds maturing in 7 years we worked with above (one with 2% coupon, one with 10% coupon, and one with 20% coupon). Next, consider the move in yield from i0 = 15% to i1 = 17%. Using your formula above, calculate the approximate duration of each of the three Treasury bonds maturing in 7 years we worked with above (one with 2% coupon, one with 10% coupon, and one with 20% coupon).

B Par Value of Coupon CY20 Maturity T 1000 0.97% 7 years 14 semi annual periods Coupon Rate 2% 10% 20% Coupon Rate per half yea 1% 5% 10% Coupon Amount 10.00 50.00 100.00 Bond Price Bond Price Bond Price Description Yeild for C = 2% for C = 10% for C = 20% at CY20 0.97% 47 points under 0.5% $1,103.06 $1,652.70 $2,339.74 153 points over 2.5% $ 968.07 $1,478.90 $2,117.42 353 points over 4.5% $ 851.30 $1,327.14 $1,921.94 553 points over 6.5% $ 750.12 $1,194.35 $1,749.65 753 points over 8.5% $ 662.30 $1,077.93 $1,597.48 953 points over 10.5% $ 585.95 $ 975.64 $1,462.76 1153 points over 12.5% $ 519.48 $ 885.59 $1,343.23 1353 points over 14.5% $ 461.51 $ 806.14 $1,236.94 1553 points over 16.5% $ 410.88 $ 735.91 $1,142.20 1753 points over 18.5% $ 366.58 $ 673.69 $1,057.58 B Par Value of Coupon CY20 Maturity T 1000 0.97% 7 years 14 semi annual periods Coupon Rate 2% 10% 20% Coupon Rate per half yea 1% 5% 10% Coupon Amount 10.00 50.00 100.00 Bond Price Bond Price Bond Price Description Yeild for C = 2% for C = 10% for C = 20% at CY20 0.97% 47 points under 0.5% $1,103.06 $1,652.70 $2,339.74 153 points over 2.5% $ 968.07 $1,478.90 $2,117.42 353 points over 4.5% $ 851.30 $1,327.14 $1,921.94 553 points over 6.5% $ 750.12 $1,194.35 $1,749.65 753 points over 8.5% $ 662.30 $1,077.93 $1,597.48 953 points over 10.5% $ 585.95 $ 975.64 $1,462.76 1153 points over 12.5% $ 519.48 $ 885.59 $1,343.23 1353 points over 14.5% $ 461.51 $ 806.14 $1,236.94 1553 points over 16.5% $ 410.88 $ 735.91 $1,142.20 1753 points over 18.5% $ 366.58 $ 673.69 $1,057.58