Question: Consider a $ 1 0 0 par value bond that has an 8 % coupon rate, pays a semi - annual coupon, matures 2 years

Consider a $

100

par value bond that has an

8 %

coupon rate, pays a semi

-

annual coupon, matures

2

years from today, and is priced to yield

6 % .

Calculate the Macauly and modified durations as a present value weighted average of the time to maturity.

For the bond above, estimate the percent and dollar price changes associated with a

0.5 %

increase in yield.

For the bond above, calculate the dollar duration and the price value of a basis point.

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