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A five-year bond with a yield of 11% (compounded annually) pays an 8% coupon at the end of each year. (a) What is the bonds
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A five-year bond with a yield of 11% (compounded annually) pays an 8%
coupon at the end of each year.
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(a) What is the bonds price?
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(b) What is the bonds duration?
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(c) Use the duration to calculate the effect on the bonds price of a 0.2% de-
crease in its yield.
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(d) Recalculate the bonds price on the basis of a 10.8% per annum yield and
verify that the result is in agreement with your answer to (c).
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Face Value is $100 and five-year bond
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