A “century” bond has a 6 percent coupon rate and makes semiannual payments ($30 every six months). The yield to maturity is 4 percent and the maturity date is December 11, 2115. You should assume that today is December 11, 2015.
1. What is the estimated market value of the stream of promised coupon payments?
2. What is the estimated market value of the promised payment at maturity?
3. Compute the modified duration of the century bond described above, using the short-cut formula described in Fabozzi.