You own a bond that has a duration of 6 years. Interest rates are currently 7%, but you believe the Fed is about to increase interest rates by 25 basis points. Your predicted price change on this bond is ________.
A. +1.4%
B. -1.4%
C. -2.51%
D. +2.51%
B. -1.4%
D* = 6/1.07 = 5.61
P/P = -D*( y) = -5.61(.25%) = -1.4%
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