What is the price of bond

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a. What is the expected cash flow of a 6% coupon bond that pays interest annually, matures in seven years, and has a principal of $1,000?

b. Assuming a discount rate of 8%, what is the price of this bond?

c. Assuming discount rate of 8.5%, what is the price of this bond?

d. Assuming discount rate of 7.5%, what is the price of this bond?

e. What is the duration of this bond, assuming the price is the one your calculated in part (b)?

f. If the yield changes by 100 basis points, from 8% to 7%, by how much would you approximate the percentage price change to be using your estimate of duration in part (e)?

Reference no: EM131160940

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