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1. (12 points) Bond A is a semiannually compounded, zero-coupon bond with a face value of $1,000.00. At issuance, the market interest rate for bonds

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1. (12 points) Bond A is a semiannually compounded, zero-coupon bond with a face value of $1,000.00. At issuance, the market interest rate for bonds with a similar risk profile was 6.50%. For Bond A. given different bond maturities (Column A), compute Bond A's price at a market interest rate of 6.50% (Column B) and 10.00% (Column C). Next, compute the percent change in Bond A's prices as the market interest rate increases from 6.50% to 10.00% (Column D). Essentially, Column D is measuring the bond's sensitivity to interest rate changes. (A) Time to Maturity (Years) 1 5 15 30 (B) I/YR = 6.50% (C) I/YR 10% H (D) (C-B)/B % A Price

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