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…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...

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