Describe and interpret the assumptions related to problem

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Reference no: EM131870912

Consider a 10 year bond with face value $1,000, pays 6% coupon semi-annually and has a yield-to-maturity of 7%. How much would the approximate percentage change in the price of bond if interest rate in the economy decreases by 0.80% per year?

(i) Describe and interpret the assumptions related to the problem.

(ii) Apply the appropriate mathematical model to solve the problem.

(iii) Calculate the correct solution to the problem.

Reference no: EM131870912

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