Compute the duration and modified duration

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Calculate the 2nd year forward rate of a bond security if a one-year bond security YTM is 7% and a two-year bond security YTM is 9%.

(a) Compute the duration and modified duration of a 4 year bond that makes annual payments with a coupon rate of 9% and a YTM of 7%.

(b) If interest rates FALL by 100 basis points, what is the dollar and percentage change in price?

(c) If interest rates RISE by 100 basis points, what is the dollar and percentage change in price?

Reference no: EM132853801

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