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Assume that a bond has 3 years left to maturity and pays its 5% coupon annually. a. If the prevailing interest rate for this bond
Assume that a bond has 3 years left to maturity and pays its 5% coupon annually. a. If the prevailing interest rate for this bond is 6%, what is the price of the bond?b. Compute the duration and modified duration of the bond. c. Using modified duration, compute the change in price of the bond if the interest rate increases 0.5%.
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