A 10 percent coupon rate,five-year bond is currently selling to yield 12 percent and is priced at $927.50.
a)Recalculate the price of the bond based on a 7 percent yield to maturity and calculate the percentage price change. (use annual compounding)
b)If this bond has a duration of 3.40,how would you approximate the change in price of the bond for a 5 percent change in the yield to maturity?
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