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Bond Price calculation: An investor buys a bond with the following characteristics: Maturity - 10 years Coupon - 4.5%, paid once per year Nominal Value

Bond Price calculation:

An investor buys a bond with the following characteristics:

  • Maturity - 10 years
  • Coupon - 4.5%, paid once per year
  • Nominal Value - 100
  • Macaulay duration - 7.9321
  • The yield to maturity at the time of purchase is 8.50%.

Use the modified Macaulay duration to calculate what the price of the above bond would have been immediately after purchase, if the yield to maturity had dropped to 6.5%.

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