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  3. 1. a bond that pays interest annually has a 6 perc

1. A bond that pays interest annually has a 6 percent promised yield and a...

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Finance

1. A bond that pays interest annually has a 6 percent promised yield and a price of $1,025. Annual interest rates are now projected to fall 50 basis points. The bond's duration is six years. What is the predicted new bond price after the interest rate change? (Watch your rounding.)

2. An investor buys a $10,000 par, 4.25 percent semiannual coupon TIPS security with three years to maturity. If the annual inflation every year over the investor's holding period is 2.50 percent, what is the principal value of the TIPS when it matures?

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