Bond A is a 7-year, 8% Coupon Bond. It has Duration of 4.2 and a Current Yield of 6.6%. If the yield were to suddenly decrease to 6.1% approximately, what will be the percentage price change for this Bond?

Increase in Price of Bond will Decrease Current Yield. Price is Inversely proportionate to Yield. Change in Price = - Modified Duration x Yield Change Yield Change = 6.1% - 6.6% = -0.5% Change in Price = - 4.2 * (-0.5) = 2.1 Price Increases by 2.1% .