8.) A bond has a $1,000 face value and matures in 8 years. It pays a 7% annual coupon and the bond has a yield to maturity if 10%.

a.) What is the current price of the bond?

b.) What is the bonds current yield (income yield)?

c.) Assuming the yield to maturity remains at 10%, what will be the price of the bond in one year (with 7 years remaining until maturity)?

d.) What is the bonds capital gains (growth) yield?

9.) A bond has a face value of $1,000 and 4 years to maturity. It pays a 3% annual coupon and has a 2% yield to maturity. a.) Compute this bonds duration.b.) What is this bonds modified duration?

10.) A bond has a $1,000 face value and 10 years to maturity. It has a 7% coupon (paid semiannually). This bond has a modified duration of 6.9 years.

Initially, the yield to maturity on the bond is also 7% and the bond sells for par value.

The Federal Reserve cuts interest rates instantaneously and the yield to maturity on this bond falls to 5%.

a.) Using the modified duration statistic above, what is the predicted percentage change in this price of this bond when the yield to maturity decreases from 7% to 5%?

b.) Compute the exact percentage change in the price of this bond when the yield to maturity decreases from 7% to 5%.

c.) Briefly explain why your answers in parts a.) and b.) above are not exactly equal.