Question: Assume that the continuously compounded interest rate is 6%. A bond has 8% coupon paid annually, 3 years to maturity and par value of $100.

Assume that the continuously compounded interest rate is 6%. A bond has 8% coupon paid annually, 3 years to maturity and par value of $100. Suppose the interest rate goes down to 5%. What would be the percentage change in the bond price implied by the duration plus convexity approximation?

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