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An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon and a 9% required rate of return. The bond
An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon and a 9% required rate of return. The bond pays interest semiannually.
a)What is the bond's modified duration?
b)If promised yields rise 25 basis points immediately after the purchase what is the predicted price change in dollars based on the bond's duration?
(please solve with formula not the macauly duration chart)
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