Question 3 (2 points each)

Next, consider again the bond in Question 1, but suppose that it now has a lower coupon rate of 4%.

Settledate: 1-Jan-2019

Maturity date: 1-Jan-2029

Annual coupon rate: 4%

Coupons paid semi-annually

Yield to maturity: 6%

Par value: $100

Time to maturity: T=10 years

1.Calculate the price of the bond.

2.Calculate the Macaulay duration in half-years.

3.Calculate the Macaulay duration in years.

4.

Fill in the Blanks

Type your answers in all of the blanks and submit

- current answer: All else equal, as coupon rates go down, bond duration goes - blank1 - (up/down). This means that the bond price becomes - blank2 - (more/less) sensitive to changes in interest rates as coupon rates are lower, all else equal.

All else equal, as coupon rates go down, bond duration goesblank1 - Word Answer

(up/down). This means that the bond price becomesblank2 - Word Answer

(more/less) sensitive to changes in interest rates as coupon rates are lower, all else equal.