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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 increase to 11 percent. Use the duration valuation equation.
A. +4.25 percent
B. -4.25 percent
C. +8.58 percent
D. -3.93 percent
E. -3.84 percent
Answer
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