Question: Please show steps Suppose the yield to maturity on a 6.0% coupon bond is 4.5%. The bond has a face value of $1,000, pays coupons

Please show steps

Suppose the yield to maturity on a 6.0% coupon bond is 4.5%. The bond has a face value of $1,000, pays coupons semi-annually, and has a Macaulay duration of 10.49 years. Its price is 1,162.34. What is this bond's modified duration?

Now suppose the yield to maturity on this bond decreases to 3.5%. Approximately what will be the percentage increase in the bond's price? Approximately what will the new price of the bond be? (It's actual new price would be $1,289.82).

What is the source of the error in this estimate?

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