Question
A 30-year maturity bond making annual coupon payments with a coupon rate of 15.5% has duration of 11.25 years and convexity of 182.9. The bond
A 30-year maturity bond making annual coupon payments with a coupon rate of 15.5% has duration of 11.25 years and convexity of 182.9. The bond currently sells at a yield to maturity of 8%.
e-1.Find the exact price of the bond if it's yield to maturity rises to 9%.(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price of the bond $
e-2.What price would be predicted 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 for each rule?(Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.)
Percent Error | ||
YTM | Duration Rule | Duration-with- Convexity Rule |
9% | % | % |
|
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