Eurobonds pay coupons annually. Suppose a Eurobond matures in six years, the annual coupon is 8%, the face value of the bond is $1000, and the current yield to maturity is 8%. a) Calculate the duration (round to three decimals). b) Calculate the modified duration (round to three decimals). c) Suppose that yields rise by 1 basis point from 8.00% to 8.01%. Calculate the predicted percentage change and dollar change in the bond price based on its duration.

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.