If the market interest rates decrease by 5 per year (i e YTM becomes 6 5 ) Use duration formula to find how such interest rate change will affect the bond price Find the new bond price using a financial calculator Compare actual and duration predicted bond price changes Which change is larger What role does bond price convexity play here

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Question: If the market interest rates decrease by .5% per year (i.e. YTM becomes 6.5%). Use duration formula to find how such interest rate change will

If the market interest rates decrease by .5% per year (i.e. YTM becomes 6.5%). Use duration formula to find how such interest rate change will affect the bond price?

Find the new bond price using a financial calculator.
Compare actual and duration predicted bond price changes.
Which change is larger? What role does bond price convexity play here?

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