Question: Consider a bond that has a 30-year maturity, an 8% coupon rate, and sells at an initial yield to maturity of 8%. Because the coupon

  1. Consider a bond that has a 30-year maturity, an 8% coupon rate, and sells at an initial yield to maturity of 8%. Because the coupon rate equals the yield to maturity, the bond sells at par value: P = $1,000.00. Calculate the duration and the modified duration. If we assume the convexity of the bond is 212.4 and the bonds yield increases from 8% to 10%, how much should the bond price decline?

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