How much would approximate the percentage price change

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Question a. What is the cash flow of a 6% coupon bond that pays interest annually, matures in seven years, and has a principal of $1000?

Question b. Assuming a discount rate of 8%, what is the price of this bond?

Question c. Assuming a discount rate of 8.5%, what is the price this bond?

Question d. Assuming a discount rate of 7.5%, is the price of this bond?

Question e. What is the duration of this bond, assuming that the price is the one you calculated in part (b)?

Question f. If the yield changes by 100 basis points, from 8% to 7%, by how much would you approximate the percentage price change to be using your estimate of duration in part (e)?

Reference no: EM132503639

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