Question

A 9% annual coupon bond with twenty years remaining to maturity is selling at $1,098.13. a....

A 9% annual coupon bond with twenty years remaining to maturity is selling at $1,098.13.

a. What is the market interest rate on similar bonds?  

b. What is the duration of this bond?

c. Suppose the market interest rate increases by 1%. What would the investors be willing to pay for the bond now?

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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