A 30-year $100-par bond pays 3% annual coupons. Its price is $96.48. If its annual yield to
Fantastic news! We've Found the answer you've been seeking!
Question:
A 30-year $100-par bond pays 3% annual coupons. Its price is $96.48. If its annual yield to maturity increases by 90 basis points, how accurate (in % error) is the estimate of its price using duration, and how does the accuracy change if you include the convexity adjustment? Use 2 decimal places for the % errors. Do the estimates over/underestimate the true price, and was that what you were expecting?
Expert Answer:
Answer rating: 100% (QA)
Solution The current yield will be the IY rate function of below variables IY of N 30 PMT 3 PV 96... View the full answer
Posted Date:
Students also viewed these accounting questions
-
If a bonds yield to maturity does not change, how does its cash price change between coupon payments?
-
If a bond's yield to maturity does not change, the return on the bond each year will be equal to the yield to maturity. Confirm this with a simple example of a four-year bond selling at a premium to...
-
A $2000 bond with annual coupons is redeemable at par in five years. If the first coupon is $400, and subsequent annual coupons are worth 75% of the previous years coupon, find the purchase price of...
-
The following list shows the top six pharmaceutical companies in the United States and their sales figures ($ millions) for a recent year. Use this information to construct a pie chart and a bar...
-
Risk managers use a number of methods for managing risk. For each of the following, what method for handling risk is used? Explain your answer. a. The decision not to carry earthquake insurance on a...
-
Design of fluid control circuits, it is desired to control a reactor via continuous analysis of a side stream. Calculate the maximum frequency of concentration changes that can be detected as a...
-
Equilibrium for extraction of acetic acid from 3-heptanol into water at \(25^{\circ} \mathrm{C}\) is \(\mathrm{y}=1.208 \mathrm{x}\), where \(\mathrm{y}=\) weight fraction acetic acid in water and...
-
a. Assume that Carolyn places currently available funds in the savings account. Determine the amount of money Carolyn will have available at retirement once she sells her house if she retires at (1)...
-
what is not a method that property and liability insurance companies can use to protect against catastrophic losses?
-
PROBLEM 2.60 Two cables tied together at C are loaded as shown. Determine the range of values of P for which both cables remain taut. 300 W 120 lb
-
Given a data frame d with 100 rows and 5 numeric columns, the following statements were executed in an R session: p - prcomp (d); u1
-
Which model results below best depicts the Principle of Parsimony in forecasting? A. thirty factors explain 90% of the variation in demand B. three factors explain 80% of the variation in demand C....
-
2. The graph in Figure below shows a particle's velocity moving along a coordinate line. At t = 0, the position is x = 0. v(t), 5 0 m sec -5 10 20 30 40 50 60 t,sec (a) Sketch the acceleration a vs....
-
Complete the Java method convertBinaryStrToDecimal(String s) to convert an input of binary string s to the equivalent decimal number using "for loop". For example, after you call the method convert...
-
es Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside...
-
Nancy was enrolled as a full-time student for the entire year and had no earned income. She is single and has two qualifying children for the Child and Dependent Care Credit. For the purpose of...
-
Flaming Follage Sky Tours is a small sightseeing tour company in New Hampshire. The firm specializes in aerial tours of the New England countryside during September and October, when the fall color...
-
Refer to the Conservation Ecology (Dec. 2003) study of the causes of forest fragmentation, presented in Exercise 2.166 (p. 97). Recall that the researchers used advanced high-resolution satellite...
-
Consider the linear regression model for data independent over i with y i = x i + u i . Suppose E [ u i x i ] 0 but there are available instruments z i with E [ u i z i ] = 0 and V [ u i z i ]...
-
A nonnegative integer variable \(y\) that is geometric distributed has density (or more formally probability mass function) \(f(y)=(y+1)(2 \lambda)^{y}(1+2 \lambda)^{-(y+0.5)}, y=\) \(0,1,2, \ldots,...
-
Consider the linear regression model y i = x i + u i with nonstochastic regressors x i and error u i that has mean zero but is correlated as follows: E [ u i u j ] = 2 if i = j , E [ u i u j ] = ...
Study smarter with the SolutionInn App