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A 3 0 - year - maturity bond making annual coupon payments with a coupon rate of 6 % has duration of 1 4 .
A yearmaturity bond making annual coupon payments with a coupon rate of has duration of years and convexity of The bond currently sells at a yield to maturity of
Required:
a Find the price of the bond if its yield to maturity falls to
b What price would be predicted by the duration rule?
c What price would be predicted by the durationwithconvexity rule?
d What is the percent error for each rule?
d What do you conclude about the accuracy of the two rules?
e Find the price of the bond if its yield to maturity increases to
e What price would be predicted by the duration rule?
e What price would be predicted by the durationwithconvexity rule?
e What is the percent error for each rule?
e Are your conclusions about the accuracy of the two rules consistent with parts ad
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Req E
Req E
Req E
Req E
Find the price of the bond if its yield to maturity falls to
Note: Do not round intermediate calculations. Round your answer to decimal places.
Price of the bond
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