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10. Calculate the duration of a $1,000, 12‐year
bond using annual compounding and a current market rate
of 9 percent.
12. Calculate the duration for a $1,000, 4‐year
bond with a
4.5 percent annual coupon, currently selling at par. Use the
bond’s duration to estimate the percentage change in the
bond’s price for a decrease in the market interest rate to
3.5 percent. How different is your answer from the actual
price change calculated using Equation 5.6?
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