A 30-year maturity bond making annual coupon payments with a coupon rate of 6.2% has duration...

 

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A 30-year maturity bond making annual coupon payments with a coupon rate of 6.2% has duration of 11.03 years and convexity of 178.02. The bond currently sells at a yield to maturity of 10%. a. Find the price of the bond if its yield to maturity falls to 9%. b. What price would be predicted by the duration rule? c. What price would be predicted by the duration-with-convexity rule? d-1. What is the percent error for each rule? d-2. What do you conclude about the accuracy of the two rules? e-1. Find the price of the bond if its yield to maturity increases to 11%. e-2. What price would be predicted by the duration rule? e-3. What price would be predicted by the duration-with-convexity rule? e-4. What is the percent error for each rule? e-5. Are your conclusions about the accuracy of the two rules consistent with parts (a) - (d)? A 30-year maturity bond making annual coupon payments with a coupon rate of 6.2% has duration of 11.03 years and convexity of 178.02. The bond currently sells at a yield to maturity of 10%. a. Find the price of the bond if its yield to maturity falls to 9%. b. What price would be predicted by the duration rule? c. What price would be predicted by the duration-with-convexity rule? d-1. What is the percent error for each rule? d-2. What do you conclude about the accuracy of the two rules? e-1. Find the price of the bond if its yield to maturity increases to 11%. e-2. What price would be predicted by the duration rule? e-3. What price would be predicted by the duration-with-convexity rule? e-4. What is the percent error for each rule? e-5. Are your conclusions about the accuracy of the two rules consistent with parts (a) - (d)?

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Bond Price Calculations with Duration and Convexity We are given information about a 30year bond and asked to find the price under different scenarios ... View the full answer