A 30-year maturity bond with face value of $1000 making annual coupon payments with a coupon rate of 11% has duration of 17.5 years and convexity of 191 . The bond currently sells at a yield to maturity of 7%. (a) Find the price of the bond if its yield to maturity falls to 6% or rises to 8%. (20 marks) (b) What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? (30 marks) (c) What is the percentage error for each rule? (20 marks) (d) Explain the link between duration and yield to maturity. (30 marks) A 30-year maturity bond with face value of $1000 making annual coupon payments with a coupon rate of 11% has duration of 17.5 years and convexity of 191 . The bond currently sells at a yield to maturity of 7%. (a) Find the price of the bond if its yield to maturity falls to 6% or rises to 8%. (20 marks) (b) What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? (30 marks) (c) What is the percentage error for each rule? (20 marks) (d) Explain the link between duration and yield to maturity. (30 marks)