Question
PLEASE HELP WITH PARTS C, d-1, e-3, and e-4. A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration
PLEASE HELP WITH PARTS C, d-1, e-3, and e-4.
A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 11.36 years and convexity of 186.4. The bond currently sells at a yield to maturity of 8%.
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.) Correct Answer: $1,868.63
b. What price would be predicted by the duration rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Correct Answer: $1,851.70
c. What price would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NEED HELP
d-1. What is the percent error for each rule? (Enter your answer 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.) YTM= 7%
d-2. What do you conclude about the accuracy of the two rules? multiple choice 1 The duration rule provides more accurate approximations to the actual change in price. Answer: The duration-with-convexity 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.) Correct Answer: $1,513.68
e-2. What price would be predicted by the duration rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Correct Answer: $1,499.24
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.)
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.) YTM= 9%
e-5. Are your conclusions about the accuracy of the two rules consistent with parts (a) (d)? multiple choice 2 Yes No
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