Consider these two bond for (assume that each bond pays interest semiannually):
• Bond A
– Coupon: 8%
– Yield to maturity: 8% – Maturity (years): 2
– Par: $100.00
– Price: $100.00
• Bond B
– Coupon: 9%
– Yield to maturity: 8% – Maturity (years): 5
– Par: $100.00
– Price: $104.055
(a) What is the price value of a basis point for bonds A and B?
(b) Compute the Macaulay duration for the two bonds.
(c) Compute the modified duration for the two bonds.