Compare the result with the actual percentage change in the


Calculate the duration for a $1000 par, 4-year bond with a 4.5% annual coupon, currently selling at par.

(i) Use the duration to estimate the “percentage” change in the bond’s price (DP/P) for a decrease in the market interest rate to 3.5%.

(ii) Compare the result with the “actual” percentage change in the bond price.

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Financial Management: Compare the result with the actual percentage change in the
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