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A $1000 14-year zero coupon bond sells at a price P to earn 4% effective. If the interest rate increases to 4.28%, let P1 be
A $1000 14-year zero coupon bond sells at a price P to earn 4% effective. If the interest rate increases to 4.28%, let P1 be the new price of this bond and P2 be an estimate of the new price of this bond using the first-order modified approximation. Find P1P2.
Possible Answers
A
.15
B
.29
C
.35
D
.43
E
.50
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