A US government bond with a face value of $1,000 has a coupon rate of 3% with
semiannual coupons, and matures in four years and six months from now. The first
coupon is due in six months from now.
You have obtained the following rates from the web site of the US Treasury. The
rates are expressed as nominal annual rates with semiannual compounding as usual.
c) What is the present value of the principal amount you receive at maturity?
d) What should be the current market price of the bond? (2 points)
e) Using the above information calculate the yield-to-maturity of this bond?
f) Calculate the duration of the bond? (5 points)
g) How much is the value of your bond holdings going to deteriorate if the inter
est rate curve shifts up by 1 percentage point? (2 points)