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a) Compute the modified duration of a 9% coupon, 4-year corporate bond with a yield to...

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Finance

a) Compute the modified duration of a 9% coupon, 4-yearcorporate bond with a yield to maturity of 10%.
b) Using the modified duration, If the market yield drops by 25basis points, there will be a __________% (increase/decrease) inthe bond's price.

Answer & Explanation Solved by verified expert
3.8 Ratings (528 Votes)
K NBond Price Coupon1 YTMk Par value1 YTMNk1K 4Bond Price 910001001 10100k 10001 101004k1Bond Price 9683K NBond Price Coupon1 YTMk Par value1    See Answer
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Transcribed Image Text

a) Compute the modified duration of a 9% coupon, 4-yearcorporate bond with a yield to maturity of 10%.b) Using the modified duration, If the market yield drops by 25basis points, there will be a __________% (increase/decrease) inthe bond's price.

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