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Consider the impact that a 2.5% decline in the interest rate has on a 20-year zero coupon bond. We discovered that the price changes from
Consider the impact that a 2.5% decline in the interest rate has on a 20-year zero coupon bond. We discovered that the price changes from $36.79 to $60.65, while the duration approximation only yields a change to $55.18, we have C = 20^2 =400. What is the the percentage change in price due to a 2.5% decline in interest rate?
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