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A 30-year maturity bond making annual coupon payments with a coupon rate of 9.5% has duration of 13.53 years and convexity of 258.03. The bond
A 30-year maturity bond making annual coupon payments with a coupon rate of 9.5% has duration of 13.53 years and convexity of 258.03. The bond currently sells at a yield to maturity of 6%. |
a. | Find the price of the bond if its yield to maturity falls to 5% or rises to 7%. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
Yield to maturity of 5% | $ |
Yield to maturity of 7% | $ |
b. | What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
Duration Rule | Duration-with- convexity Rule | |
YTM falls to 5% | $ | $ |
YTM increases to 7% | $ | $ |
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