Bond price calculated from the usual bond pricing formula

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What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration?

Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Compare your answer to the new bond price calculated from the usual bond pricing formula. What do your results tell you about the accuracy of duration?

Reference no: EM131339863

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