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A 9-year maturity zero-coupon bond selling at a yield to maturity of 775% (effective annual...

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Finance

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A 9-year maturity zero-coupon bond selling at a yield to maturity of 775% (effective annual yield) has convexity of 169.5 and modified duration of 8.06 years. A 30 -year maturity 7.5% coupon bond making annual coupon payments also selling at a yield to maturity of 7.75% has nearly identical duration 8.04 years-but considerably higher convexity of 257.5 0. Suppose the yield to maturity on both bonds increases to 8.75% What will be the actual percentage capital loss on each bond? What percentage capital loss would be predicted by the duration-with-convexity rule? (Input all amounts os positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Suppose the yield to maturity on both bonds decreases to 675%. What will be the actual percentage capital loss on each bond? What percentage capital loss would be predicted by the duration-with-convexity rule? (input all amounts as positive volues. Do not round intermediate calculations. Round your answers to 2 decimal places.)

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