Question: Use the table below for the questions that follow.
| Bond | Coupon Rate | Yield | Maturity | Duration | Modified Duration |
|
A
|
5.5% |
3.86% |
3 Year |
? |
? |
| B |
Zero Coupon |
5.25% |
7 Year |
? |
? |
A) What is the Duration and Modified Duration for both Bond A and B?
B) Compute the duration and modified duration of each bond, assuming semi-annual interest payments for the coupon bond.
C) What is the modified duration predicted price change for each bond for a 1% decrease in rates?