Question $5$

An analyst is working on a fixed$-$income case. He determines that a $6\mathrm{.}8\%$ coupon option$-$free bond,

with $7$ years to maturity, would fall $2\mathrm{.}5\%$ in price if market interest rate rise by $0\mathrm{.}5\%.$ If market interest

rates fall by $50$ basis points, discuss your opinions about what will be the change for the bond's price?

$(20$ marks$)$