# 1) Suppose that you have a three-year bond which has a 6 percent coupon rate, has a \$100 face value, and pays annual coupons. Market yields for this type of bond are 4 percent. What is the modified du 1

1) Suppose that you have a three-year bond which has a 6 percent coupon rate, has a \$100 face value, and pays annual coupons. Market yields for this type of bond are 4 percent. What is the modified duration of this bond?

2) Suppose that you have a four-year bond which has a 2 percent coupon rate, has a \$100 face value, and pays annual coupons. Market yields for this type of bond are 4 percent. What is the modified duration of this bond?

3)Suppose that you have a debt instrument that pays you \$0 in one year, \$1,000 in two years, \$2,000 in three years, and \$4,000 in four years. Market yields for this type of debt instrument are 4 percent. What is the modified duration of this debt instrument?

4) What does duration measure?

5) The shorter a bond’s maturity the longer its duration. T/F

6) Duration increases at a decreasing rate as maturity lengthens. T/F

7) The lower a bond’s coupon, the shorter its duration. T/F

8) A high yield on a bond implies a high duration.

9) Is the duration of a bond a characteristic (in the same way the coupon rate is a characteristic) of a bond?

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