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A 30-year maturity bond making annual coupon payments with a coupon rate or 15.5% has duration or 9.96 years and convexity of 144.6 The bond
A 30-year maturity bond making annual coupon payments with a coupon rate or 15.5% has duration or 9.96 years and convexity of 144.6 The bond currently sells at a yield to maturity or 10%. a. Find the price of the bond if its yield to maturity falls to 9%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. Whal price would be predicled by the duralion rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price c. What price would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price d-1. What is the percent error for each rule? (Enter your answer as a positive value. Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with Convexity Rule" to 3 decimal places.) Percent Error Duration-with- YTM 9% ration Ruk d-2. What do you conclude about th e accuracy of the two rules? The duration-with-convexity rule provides more accurate approximations to the actual change in price The duration rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond ir it's yield to maturity rises to 11%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond e-2. What price woukd be predicled by the duration rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.] Predicted price e-3. What price would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price e-4. What is the percent error tor each rie? Do not round intermediate calculations. Round-Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Percent Error YTM 11% Duration Rule Rule e-5. Are your conclusions about the accuracy of the two rules consistent with parts (a)- (d)? Yes O No
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