Question: hi tutor how to do th is problem? thank you :) A $1000 par value bond pays annual coupons at a coupon rate of 7%.

hi tutor

how to do th is problem?

thank you :)

A $1000 par value bond pays annual coupons at a coupon rate of 7%. An investor purchases the bond with exactly four years to run, when the yield to maturity on the bond is 6%, and sells the bond when it has exactly three years to run. The market yield to maturity on the bond drops to 4% immediately the investor purchases the bond, and remains at 4% a year later.

a) What is the price of the bond when it has four years to run?

b) What are the duration and the modified duration on the bond at this stage?

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