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You find a bond with 29 years until maturity that has a coupon rate of 9.5...

You find a bond with 29 years until maturity that has a coupon rate of 9.5 percent and a yield to maturity of 8.9 percent. Suppose the yield to maturity on the bond increases by 0.25 percent.

a. What is the new price of the bond using duration and using the bond pricing formula?

Estimated price:

Actual price:

b. Now suppose the original yield to maturity is increased by 1 percent. What is the new price of the bond?

Estimated price:

Actual price:

Solutions

Expert Solution

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

jeff jeffy answered 1 year ago
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