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Please Answer C through E-5 A 30-year maturity bond making annual coupon payments with a coupon rate of 15.3% has duration of 11.27 years and
Please Answer C through E-5
A 30-year maturity bond making annual coupon payments with a coupon rate of 15.3% has duration of 11.27 years and convexity of 183.3. The bond currently sells at a yield to maturity of 8%. Required: a. Find the price of the bond if its yield to maturity falls to 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What price would be predicted by the duration rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d-1. What is the percent error for each rule, if its yield to maturity falls to 7% ? (Enter your answers 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.) d-2. What do you conclude about the 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 if it's yield to maturity rises to 9%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) e-2. What price would be predicted by the duration rule, If it's yield to maturity rises to 9% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e-3. What price would be predicted by the duration-with-convexity rule, if it's yield to maturity rises to 9% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 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.) e-5. Are your conclusions about the accuracy of the two roles consistent with parts (a) - (d) Step by Step Solution
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