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A bond matures in 1 year, has a 4 % coupon rate, has a 6 % yield. It pays semiannually. Suppose interest rates decrease by

A bond matures in

1

year, has a

4 %

coupon rate, has a

6 %

yield. It pays semiannually. Suppose interest rates decrease by

40

basis points. Use the duration model to estimate percentage change in the price of the bond.

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