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Compute the Price, Duration and Convexity of a bond with a face value of 1000 , coupon rate of 10% trading in the market at
Compute the Price, Duration and Convexity of a bond with a face value of 1000 , coupon rate of 10% trading in the market at 12% yield to maturity expiring in 7 years. i) Estimate the change in the price of the bond when the yield decreases by 200 basis points using the Duration-based approximation method and compare it with the actual price. 11) Estimate the change in the price of the bond when the yield decreases by 200 basis points using the Convexity adjusted approximation method and compare it with the actual price. 14
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