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A company just announced a new stock issue, the proceeds of which will be used to pay down debt. The announcement of decreasing leverage caused
A company just announced a new stock issue, the proceeds of which will be used to pay down debt. The announcement of decreasing leverage caused the yield spread on the companys existing 10-year bonds to decrease by 50 basis points. If the bonds have a modified duration of 7.53 and convexity of 69.9, the percentage change in the bonds value is closest to:
A)3.85%.
B)4.20%.
C) 4.15%.
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