Why doesnt the duration approach give you exact answer

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Calculate the duration, in years, of a bond that matures in 5 years, pays $60 in interest twice a year (e.g., 12% coupon rate), and sells for $997.55. Explain how duration can be used (or modified duration) to estimate the change in the price of a bond when the yield to maturity changes. Estimate how much the price of this bond will change if rates go up one percentage point, and then calculate an exact price assuming a one percentage point jump in the YTM. Why doesn't the duration approach give you an exact answer.

Reference no: EM132115008

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