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You have just purchased a bond that has a coupon rate of 7%, pays interest annually, and has a face value of $1,000, 6 years to maturity, and a yield to maturity of 8%. The bond's duration is 3.6481 years. You expect that interest rates will fall by .3% later today.

A. What price did you pay for the bond?

B. Use this modified duration to find the approximate percentage change in the bond's price. Find the new price of the bond from this calculation.

C. Use your calculator to do the regular present value calculations to find the bond's new price at its new yield to maturity.

D. What is the amount of the difference between b and C? Why are your answers different? Explain the reason in words and illustrate it graphically.

For part A, B, C, and D the professor has put up the correct answers, but he has not shown the work. Please Chegg, help me understand where those answers came from for part A, B, and C. and D Please show work so I can understand it more clearly. It is important to me that I know how to solve this.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92714729

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