1. Consider a 30-year corporate bond paying 8 percent semi-annual coupon. The current yield to maturity is 10 percent. Find the approximate bond’s modified duration by using changes in the interest rate up and down by 5 basis points.
2. An investor purchases a 30-year municipal bond for $960. The bond’s coupon rate is 8 percent and, it still had 16 years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the municipality and his marginal tax rate is 34 percent, what will be his (effective) yield to maturity?