An $8-$year$-$maturity zero$-$coupon bond selling at a yield to maturity of $9\%($effective annual yield$)$ has convexity of $155\mathrm{.}1$ and

modified duration of $7\mathrm{.}06$ years. A $30-$year$-$maturity $5\%$ coupon bond making annual coupon payments also selling at a yield to

maturity of $9\%$ has nearly identical duration$-7\mathrm{.}04$ years$-$but considerably higher convexity of $244\mathrm{.}8.$

Required:

a$.$ Suppose the yield to maturity on both bonds increases to $10\%.$ What will be the actual percentage capital loss on each

bond? What percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

b$.$ Suppose the yield to maturity on both bonds decreases to $8\%.$ What will be the actual percentage capital loss on each

bond? What percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Suppose the yield to maturity on both bonds decreases to $8\%.$ What will be the actual percentage capital loss on each bond?

What percentage capital loss would be predicted by the duration$-$with$-$convexity rule?

Note: Input all amounts as positive values. Do not round intermediate calculations. Round your answers to $2$ decimal places.