Because of an unforeseen energy crisis, you see strong evidence that market return expectations will be volatile. In particular, you are looking at a $1,000 face value bond by issued by Kestco. The bond has 7 years until maturity, has a coupon of 8% paid semiannually, and an initial 5% YTM. Youve already determined that the price of the bond is $1,175.36; that the duration of the bond is 5.63 years; and that the modified duration of the bond is 5.49 years.

Using the modified duration for your calculation, what is the new price of the bond if overall market return expectations rise by 2%?

A. $1,105.98

B. $1,046.31

C. $999.51

D. $992.23

E. $981.78