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What percentage change in price would

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1. a. A 10-year 8% coupon bond has a yield of 9%. Using annual compounding, what would the duration of the bond equal?

b. If interest rates were to decrease by 30 basis points, what percentage change in price would you expect for the bond?

c. Find the new price.

d. What does it mean to immunize yourself from interest rate risk using duration? How would you do it with a coupon bond? Zero coupon bond?

All of the answers for b-d will be found after finishing a.

Reference no: EM132524691

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