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Consider a 9% annual coupon bond with 3 years of remaining maturity and suppose the current YTM is 6%. Calculate (a) the duration and (b)
Consider a 9% annual coupon bond with 3 years of remaining maturity and suppose the current YTM is 6%. Calculate (a) the duration and (b) the convexity of this bond. Further, (c) if rates are expected to decline two percentage points, use the duration approximation with the convexity adjustment to estimate the percentage change in price for this bond.
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