1. A bond pays annual interest. Its coupon rate is 6.7%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 3.7%. The duration of this bond is _______ years.
a)4.00
b)3.66
c)3.53
d)3.33
2. You own a bond that has a duration of 5 years. Interest rates are currently 6%, but you believe the Fed is about to increase interest rates by 27 basis points. Your predicted price change on this bond is ________. (Select the closest answer.)
a)–1.27%
b)+4.72%
c)–4.72%
d)+1.27%