4. Bond duration 1. 2. 3. STEP: 3 of 3 Using the modified bond duration of 2.486 years, if you anticipate bond yields will increase by 1.3 percentage points, then the price of the bond will decrease by: O 2.941 percent O 3.232 percent O 3.393 percent O 3.523 percent Now suppose bond yields increase by 1.3 percentage points as expected (from 9 percent to 10.3 percent), such that the new price of the bond will be $967.84. from Using the traditional percentage change formula, the new price of the bond reflects a decrease in the price of the bond by which it can be seen that if an investor relies on modified duration to estimate the percentage change in the price of a bond, they will tend to the price decrease associated with an increase in rates. Grade Final Step TOTAL SCORE: 2/4 (to complete this step and unlock the next step)