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A 5 - year bond with a yield of 7 % ( continuously compounded ) pays an 8 % coupon at the end of each

5 -

year bond with a yield of

7 % (

continuously compounded

)

pays an

8 %

coupon at the end of each year. What is the bond's price? What is the bond's duration? Use the duration to calculate the effect on the bond's price of a

0.2 %

decrease in its yield.

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