You bought EMU bond: 5-year, coupon= 12%, paid semi-annually, par= $1,000, and YTM = 8% Durration= 3.34
If the YTM of Michigan Bond changes immediately upon purchase to 7.90%:
a. Estimate the current price of the Michigan bond using modified duration relationship
b. Estimate your wealth at the end of 4-years, if you sold the bond then, and have been reinvesting the coupon payments all along at the same 7.90% YTM rate.