Question: Assume a 7-year zero coupon bond with $1000 face value with a yield of 7%. a. What is the price of the bond? Show your

Assume a 7-year zero coupon bond with $1000 face value with a yield of 7%.

a. What is the price of the bond? Show your work to receive any credit. Round your answer to two decimal places.

b. Use the duration to calculate the effect on the bonds price of a 0.5% decrease on its yield. What is the price of the bond? Show your work to receive any credit. Round your answer to two decimal places.

c. Recalculate the bonds price on the basis of a 6.5% per annum yield and verify that your result in (b) is a good approximation of the change in the bonds price using the duration. What is the price of the bond

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