Ray Co.’s bonds, maturing in 3 years, pay 8 percent interest on a $1,000 face value. Interest is paid once per year. If your required rate of return is 6 percent, what is the value of the bond? (10 points). Assume that the modified duration of this bond is 2.80 years. If the market yield rises by 1%, how much change will there be in the bond's price in %? (5 points). What will be the new price of the bond?
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