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A five-year bond with a yield of 11% pays an 8% coupon at the end of each year. a) What is the bonds price? b)

A five-year bond with a yield of 11% pays an 8% coupon at the end of each year.

a) What is the bonds price?

b) What is the bonds duration?

c) Use the duration to calculate the effect on the bonds price of a 0.2% decrease in its yield.

d) Recalculate the bonds price on the basis of a 10.8% per annum yield, and compare.

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