Question: 7. Modified duration is defined as D Mod = DMac ' 1+y leading to the following straightforward dP P approximation: = = -Dod. dYTM,

7. Modified duration is defined as D Mod = DMac ' 1+y leading to the following straightforward dP P approximation: = = -Dod. dYTM, i.e. the return is equal to (negative) duration times change in yield (this allows us to compare durations on bonds with different yields). A 6%-coupon bond paying annually has a modified duration of 10 years and sells for $800, yielding 8%. If YTM increases to 9%, what is the expected change in price using the duration approximation?

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