Question: Consider a $ 1 , 0 0 0 1 0 - year bond that pays a 2 . 5 % annual coupon. ( a )

Consider a $ $1, 000 10 -$ year bond that pays a $2.5 %$ annual coupon.

$($ a $)$ Compute the current price and the duration of this bond, given that the required interest rate is $2.5 % .$

$($ b $)$ Suppose that the interest rate jumps to $3 % .$ What is the percent price change in the bond? Use the approximate formula based on Duration that we learned in class.

$($ c $)$ What is the new price level of the bond?

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