Question: Suppose the yield increases by 0.0005 over a week. a. Compute the new price of Bondy Bond. b. Compute the actual change in bond prices.

Suppose the yield increases by 0.0005 over a week.

a. Compute the new price of Bondy Bond.

b. Compute the actual change in bond prices.

c. Use a duration based formula to predict the change in Bondy Bond’s price. How does this compare with the actual change?

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