A coupon-paying bond pays interest semiannually. The Macaulay duration of the bond is 5.2 and its yield to maturity is 7%. Currently, the bond sells for $955. If prevailing market interest rates for comparable debt are expected to increase immediately by 50 basis points (i.e., 0.5%), using the Modified Duration, what would be the estimated price of the bond following the expected change in interest rates? 

Answer rating: 100% (QA)

We can estimate the new price of the bond using the Modified Duration MDur approach 1 Given Informat... View the full answer