Question
A five-year $100 par value step-up note pays coupons semi-annually and has the following coupon rate structure: the annual coupon rate is 4% in year
A five-year $100 par value step-up note pays coupons semi-annually and has the following coupon rate structure: the annual coupon rate is 4% in year 1, which then rises by 50 bps every year over the next four years. The YTM on this note is 4.504294% (BEY). What is your best estimate of the dollar price change of this note for an increase of 150 bps in yields? Use a rate shock of 25 bps.
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