A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11.54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. Required: a. Find the price of the bond if its yield to maturity falls to 7% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Price of the bond $ 1.620.45 b. What price would be predicted by the duration rule, if its yield to maturity falls to 7%? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Predicted price $1,6505.28 c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7%? (Do not round Intermediate calculations. Round your answer to 2 decimal places) Answer is complete and correct. Predicted price $ 1,619.25 d-1. What is the percent error for each rule, if its yield to maturity falls to 7%? (Enter your answers as positive values. Do not round Intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct. Percent Error for Percent Error for Duration-with- Convity RA Duration Rule 0.08 % 0.083 % d-2. What do you conclude about the accuracy of the two rules? The duration rule provides more accurate approximations to the actual change in price. The duration-with-convexity rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal Answer is complete but not entirely correct. Price of the bond $ 1.260.81 e-2 What price would be predicted by the duration rule, if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Predicted price 1.301.21 e-2. What price would be predicted by the duration rule, if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Predicted price $ 1,308.21 e-3. What price would be predicted by the duration-with-convexity rule, if it's yield to maturity rises to 9%. (Do not round Intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. Predicted price $ 1,302.29 e-4. What is the percent error for each rule? (Do not round Intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct. YTM Percent Error for Duration Rule Percent Error for Duration with-Convexity Rule (0.540) 9% 9.72 % e-5. Are your conclusions about the accuracy of the two rules consistent with parts (8) - (c)? O No A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11.54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. Required: a. Find the price of the bond if its yield to maturity falls to 7% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Price of the bond $ 1.620.45 b. What price would be predicted by the duration rule, if its yield to maturity falls to 7%? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Predicted price $1,6505.28 c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7%? (Do not round Intermediate calculations. Round your answer to 2 decimal places) Answer is complete and correct. Predicted price $ 1,619.25 d-1. What is the percent error for each rule, if its yield to maturity falls to 7%? (Enter your answers as positive values. Do not round Intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct. Percent Error for Percent Error for Duration-with- Convity RA Duration Rule 0.08 % 0.083 % d-2. What do you conclude about the accuracy of the two rules? The duration rule provides more accurate approximations to the actual change in price. The duration-with-convexity rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal Answer is complete but not entirely correct. Price of the bond $ 1.260.81 e-2 What price would be predicted by the duration rule, if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Predicted price 1.301.21 e-2. What price would be predicted by the duration rule, if it's yield to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Predicted price $ 1,308.21 e-3. What price would be predicted by the duration-with-convexity rule, if it's yield to maturity rises to 9%. (Do not round Intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. Predicted price $ 1,302.29 e-4. What is the percent error for each rule? (Do not round Intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct. YTM Percent Error for Duration Rule Percent Error for Duration with-Convexity Rule (0.540) 9% 9.72 % e-5. Are your conclusions about the accuracy of the two rules consistent with parts (8) - (c)? O No
