As part of your answer to problem 2, you computed the price of the bond [column (4)].

Question:

As part of your answer to problem 2, you computed the price of the bond [column (4)]. This is the same as the PV of cash flows in column (4).
a. Recompute the price of a bond based on a 11 percent (market rate of interest).
b. What is the percentage change in the price of the bond as interest rates decline by 2 percent from 13 percent to 11 percent?
c. Approximate this same value by multiplying the duration computed in problem 2 times the change in interest rates (2 percent). The answer in part c should come reasonably close to the answer in part b. However, they will not be exactly the same. Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...