Lura just purchased a Treasury bond for $94.176 at a yield rate of j₂=3.8% p.a.

The duration of Lura's bond is 4.3134 years.

Using the bond price sensitivity formula, calculate the change in price of Lura's bond that would result from an increase in the yield rate (j₂) of 33 basis points.

Question 6Answer

a. $-0.6457

b. $-0.6578

c. $-1.3155

d. $-1.2914