Compute the duration and modified duration

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(a) Compute the duration and modified duration of a 4-year bond that makes annual payments with a coupon rate of 9% and a YTM of 7%

(b) If interest rates FALL by 100 basis points, what is the dollar and percentage change in price?

(c) If interest rates RISE by 100 basis points, what is the dollar and percentage change in price?

(d) If the coupon rate was 5% instead of 9%, would the bond be more or less sensitive to changes in interest rates? Explain in detail.

Reference no: EM132807341

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