Fixed Income Q84

84A bond with a par value of $1,000 matures in 12 years with a coupon of 12% paid semiannually; it is priced to yield 13% and has a modified duration of 8.50. If the yield of the bond declines by 0.5%, the approximate percentage price change for the bond is closest to:

Option : B
Explanation : Approximate percentage price change = %ΔPVFull ≈ –AnnModDur × ΔYield = -8.50 (- 0.005) = 4.25%

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