Mary Hudson, CFA, is a bond analyst of Baker Street Fixed IncomePortfolio, a %15 billion fixed income mutual fund specializing inthe U.S. fixed income market. John Watson Ph.D. one of the leadportfolio managers, has tasked Mary to analyze the interest ratesensitivity of a five year bond issued by Morgan Company. The bondhas a coupon rate of 5% and pays coupon semi-annually. The yield tomaturity is 6%. The semi-annual Macaulary duration is 8.9434 andthe semi-annual convexity is 89.2189. If the yield to maturityfalls to 4.5% what is the predicted price using annual modifiedduration and annual convexity

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Answer rating: 100% (QA)

10917 Explanation The price of the bond can be calculated using the following f... View the full answer