Question: A fixed coupon bond with 3 years until maturity and a coupon rate of 6% paid annually is currently trading at a yield of 8%.

A fixed coupon bond with 3 years until maturity and a coupon rate of 6% paid annually is currently trading at a yield of 8%. Answer the following using the assumption of a $1,000 Face Value (in other words, use the dollar price and NOT the quoted price of the bond).

The price of the bond is $_____

The modified duration of the bond is _____. (NOTE: 2 decimals)

Using only modified duration, imagine interest rates dropped 100 basis points (in other words, the yield went down 1.00%), the estimated new price of the bond is $____.

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