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The fixed income nature of bonds implies that the price of these securities is highly sensitive to interest rate changes. For the following bond a
The fixed income nature of bonds implies that the price of these securities is highly sensitive to interest rate changes. For the following bond a three-year $1,000 bond with a 10% annual coupon with a market interest rate, or YTM of 4%, 1) calculate the duration for the bond and 2) assuming interest rates rise to 6%, what is the approximate impact to the bond price?
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