A $10\mathrm{.}5-$year$-$maturity zero$-$coupon bond selling at a yield to maturity of $5\%($effective annual yield$)$ has convexity of $153\mathrm{.}9$ and modified

duration of $9\mathrm{.}56$ years. A $30-$year$-$maturity $9\%$ coupon bond making annual coupon payments also selling at a yield to maturity of $5\%$

has nearly identical duration$-9\mathrm{.}54$ years$-$but considerably higher convexity of $241\mathrm{.}4.$

Required:

a$.$ Suppose the yield to maturity on both bonds increases to $6\%.$ What will be the actual percentage capital loss on each bond? What

percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

b$.$ Suppose the yield to maturity on both bonds decreases to $4\%.$ What will be the actual percentage capital loss on each bond? What

percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

Answer is not complete.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Suppose the yield to maturity on both bonds decreases to $4\%.$ What will be the actual percentage capital loss on each bond?

What percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

Note: Input all amounts as positive values. Do not round intermediate calculations. Round your answers to $2$ decimal places.