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A 1 2 - year maturity zero - coupon bond selling at a yield to maturity of 5 . 2 5 % ( effective annual

A 12-year maturity zero-coupon bond selling at a yield to maturity of 5.25%(effective annual yield) has convexity of 159.9 and modified
duration of 11.06 years. A 30-year maturity 9.5% coupon bond making annual coupon payments also selling at a yield to maturity of
5.25% has nearly identical duration-11.04 years-but considerably higher convexity of 258.4.
a. Suppose the yield to maturity on both bonds increases to 6.25%. What will be the actual percentage capital loss on each bond?
What percentage capital loss would be predicted by the duration-with-convexity rule? (Input all amounts as positlve volues. Do not
round Intermedlate colculatlons. Round your answers to 2 declmal places.)
b. Suppose the yield to maturity on both bonds decreases to 4.25%. What will be the actual percentage capital loss on each bond?
What percentage capital loss would be predicted by the duration-with-convexity rule? (Input all amounts os positive volues. Do not
round Intermedlate colculatlons. Round your answers to 2 decimal places.)
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