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Suppose you have a callable bond with a call price of $1025 that is selling for $990. If the yield curve shifts up by .75% the bond price will fall...

Suppose you have a callable bond with a call price of $1025 that is selling for $990.  If the yield curve shifts up by .75% the bond price will fall to $930. If it shifts down by .75% the price will rise to the call price.  Compute the bond's effective duration.

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Effective duration is the expected price change for the bond when interest rate change by 1% Duration =  [P -  - P + ]... View the full answer

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