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Zero-Coupon Bonds 1. What is the price of a zero-coupon bond with a $100 face value that matures in 7 years and has a yield

Zero-Coupon Bonds

1. What is the price of a zero-coupon bond with a $100 face value that matures in 7 years and has a yield of 7%? We assume that the compounding frequency is semiannual.

a. What is the bonds modified duration?

b. Use the modified duration to find the approximate change in price if the bond yield rises by 15 basis points.

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