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Calculate the duration of $1,000, 6% coupon bond with three years to maturity. Assume that all...

Calculate the duration of $1,000, 6% coupon bond with three years to maturity. Assume that all market interest rates are 7%. Calculate the expected price change if interest rates drop to 6.75% using the duration approximation. Calculate the actual price change using discounted cash flow.

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Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Sort &Find & Format Painter Formatting as Table Styles2 Clear Clipboard BD178 AV Alignment Number Cells Edting AW AX AY AZ BA BC BD BE D*P DURATION YEARS 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 C-A*B TIME UNTIL PAYMENT PVFACTOR PVOFPMT % PAYMENTS (t) 7.00% 0.9346 WEIGHT 60 60 1060 56.0748 52.4063 0.0576 0.0538 0.8886 0.0576 0.1076 2.6658 0.8734 0.8163865.2757 973.7568 PRICE 1.0000 2.8310 DURATION ANSWER 1 DURATION = 2.8310 YEARS DURATION APPROXIMATION FORMULADURATION (CHANGE IN YIELD)/(1 +YIELD) DURATION APPROXIMATION FORMULA2.831*(-0.0025)/(1 +0.07) DURATION APPROXIMATION FORMULA ANSWER 2 0.66145% EXPECTED PRICE CHANGE- (IN %) EXPECTED PRICE CHANGE (IN PRICE) 0.66145% 6.44 (973.7568 X 0.6614596) future INDEX INTL CAP BUD ING PV, FV, ANNUITYDIR stru WACCRESI ex d 福 130% 1 KE CAPM , UTILITY, SH beta bond cleanYIELD bond erences: P33Home nert Page Layout Formulas Data Review View dd-Ins s Cut aCopy E AutoSum ー E ゴWrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Paste Sort &Find & 2 ClearFe Select Editing Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard AZ210 AV Font Alignment Number Cells AW AX AY AZ BA BC BD BE BF 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 4 H KE CAPM UTILITY, SH ANSWER 3 PRICE WHEN RATE-6.75% PRICE = 60 X PVI FA@6.75%, 3 YEARS + 1000 X PVIF@6.75%, 3 YEARS 60(1/r(1-(1/(1+r)A3)) 1000 *(1/(1+r)A3) 60(1/0.0675*(1-(1/(1+0.0675)A31000 (1/(1+0.0675)A3) 980.23 EXPECTED PRICE CHANGE (IN PRICE) EXPECTED PRICE CHANGE- (IN %) 6.47 (980.23-973.7568) 0.66449% beta bond future INDEX INTL CAP BUD ING PV, FV, ANNUITY DIR cleanYIELD bond stru WACCRESI ex d rences: BB115 130% 03:23

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