Sarah just used $97.24 purchased a Treasury bond. Assume that the yield rate for this bond is j₂ =4.39% p.a. and the duration of this bond is 2.04 years. Without actually calculating the new price for this bond, use thebond price and the duration value to estimate (use the price sensitivity formula) the change in price of this bond that would result from an increase in yield rate (2) of 14 basis points. Round your answer to four decimalplaces.a. -0.2660O b. -0.1330O c. -0.2718d. -0.1359

Step 1: Modified duration = Macaluay duration / (1 + yield)Modified duration = 2.04 / (1 +…

Answered: Sarah just used $97.24 purchased a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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