Question: Consider a U . S . Treasury note with two years to maturity. The coupon rate is 4 % and coupons are paid annually. (

Consider a U.S. Treasury note with two years to maturity. The coupon rate is 4% and
coupons are paid annually.
(a) The bond is issued at par. What is duration?
(b) One year later, the interest rate has decreased to 3%. What is duration at this time?
(c) How large is the capital gain or loss over the first year of the life of the bond?

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