The duration of an 11-year, $1,000 Treasury bond paying a 10 percent semiannual coupon and selling at

Question:

The duration of an 11-year, $1,000 Treasury bond paying a 10 percent semiannual and selling at par has been estimated at 6.763 years.
a. What is the modified duration of the bond? What is the dollar duration of the bond?
b. What will be the estimated price change on the bond if interest rates increase 0.10 percent (10 basis points)? If rates decrease 0.20 percent (20 basis points)?
c. What would the actual price of the bond be under each rate change situation in part (b) using the traditional present value bond pricing techniques? What is the amount of error in each case? Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...