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Calculate the macaulay duration of the bond

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Reference no: EM133069175

An annual coupon bond has a coupon rate of 12% and matures in two years. The current bond yield is 10%, the face value for the bond is $1000.

Answer the following questions:

-Calculate the Macaulay duration of the bond

-Using the duration approach, calculate the percentage of change in bond price when the bond yield increases by 1.5%

-Discuss the limitations of the duration approach in modelling the interest rate sensitivity of a bond

Reference no: EM133069175

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