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A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration...

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Finance

  1. A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of 8%.(25 points)
  1. Find the price of the bond if its yield to maturity falls to7.5% or rises to 8.5%.
  2. What prices for the bond at these new yields would be predictedby the duration rule?
  3. What prices for the bond at these new yields would be predictedby the duration-with-convexity rule?
  4. What is the percent error for each rule?
  5. What do you conclude about the accuracy of the two rules?

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A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of 8%.(25 points)Find the price of the bond if its yield to maturity falls to7.5% or rises to 8.5%.What prices for the bond at these new yields would be predictedby the duration rule?What prices for the bond at these new yields would be predictedby the duration-with-convexity rule?What is the percent error for each rule?What do you conclude about the accuracy of the two rules?

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