Graph (show the cash flows) of the following bond:
a. A $20,000 par value bond with a coupon of 4.0% paid semi-annually, maturing in 6 years.
b. Find the current price of the Bond if you use 4.0% as the discount rate.
c. Is this bond priced at a discount or a premium?
Macaulay Duration:
a. Calculate the price of a bond with a Face Value of $1,000, with an ANNUAL coupon of 10% (not paid semi-annually, but once a year), with 3-years left to maturity, if current interest rates were 7.0%.
b. Calculate the Macaulay Duration of this bond and explain what your answer means.
c. Calculate the Modified Duration and explain what your answer means.