The financial manager of Grupo Olimpia, a company that produces school supplies, has decided to issue 50,000 bonds in order to raise capital to invest in a new notebook assembly machine. The characteristics of these bonds are the following:

5-year maturity

Coupons every four months increasing at a constant rate of 0.5% effective 4-monthly from the second coupon (the first coupon will not have growth)

Coupon rate of 9% nominal annual, for the calculation of the first coupon.

Yield to Maturity of 14% nominal annual

Face Value $1,000

a) Calculate the amount of money raised by Grupo Olimpia through this issue.

b) Given that there is great uncertainty in the financial markets, analysts expect a decrease in interest rates. Approximate the percentage change in the price of each bond using the duration, if the nominal annual yield to maturity decreases by 200 basis points. By what percentage will you underestimate the percentage change in the price of the bond?