Question: Consider a $1,000 face value zero-coupon bond with 25 years to maturity. Suppose that the yield-to-maturity (APR, annually compounded) on this bond unexpectedly changed today

Consider a $1,000 face value zero-coupon bond with 25 years to

Consider a $1,000 face value zero-coupon bond with 25 years to maturity. Suppose that the yield-to-maturity (APR, annually compounded) on this bond unexpectedly changed today from 8% to 6%. a) What is the actual percentage price change of this bond? b) Calculate the duration of this bond when the yield-to-maturity was 8%. Approximately, what is the percentage price change of this bond implied by duration when the yield-to-maturity decreases from 8% to 6% ? c) By how much does the duration overestimate or underestimate the actual price change (in \$)

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