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Question
A bond is scheduled to mature in five years. Its coupon rate is 9 percent with interest paid annually. This $1,000 par value bond carries a yield to maturity of 10 percent.
Calculate the percentage change in this bond's price if interest rates on comparable risk securities decline to 7 percent. Use the duration valuation equation.
A. +8.58 percent
B. +12.76 percent
C. -12.75 percent
D. +11.80 percent
E. +11.52 percent
Answer
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