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Consider a 4-year, 10% coupon bond that is priced to yield 8% with quarterly payments. Use the closed-form equation to calculate duration, modified duration ,
Consider a 4-year, 10% coupon bond that is priced to yield 8% with quarterly payments. Use the closed-form equation to calculate duration, modified duration , and convexity of this 4-year bond! Then, calculate the predicted bond price assuming interest rates fall by 300 bps. Compare the predicted bond price to the new bond price of $1,180.25!
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