Question: 6. Consider a 10 year bond with face value $1,000, pays 6% coupon semi-annually and has a yield-to-maturity of 7%. How much would the approximate

6. Consider a 10 year bond with face value $1,000, pays 6% coupon semi-annually and has a yield-to-maturity of 7%. How much would the approximate percentage change in the price of bond if interest rate in the economy decreases by 0.80% per year?

Required to show the following 3 steps for this problem:

(i) Describe and interpret the assumptions related to the problem. (ii) Apply the appropriate mathematical model to solve the problem. Describing the breakdown of what each variable does for the problem. (iii) Calculate the correct solution to the problem.

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