What is the bond modified duration

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Clifton Ltd. has just issued a three-year bond with face value £100 and a coupon rate of 3% per year. Coupons are paid semi-annually. The term structure of interest rates is flat at 4% per year. Derive the payoff structure of the bond and calculate its price. Calculate the bond's Macaulay duration. What does this figure imply for the interest rate sensitivity of the bond? What is the bond's modified duration? Estimate the change in the price of the Clifton Ltd. bond for an 80 basis points upward shift in the term structure.

Reference no: EM133113055

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