Question: Chapter 11 Problem 24 A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11:54 years and convexity

Chapter 11 Problem 24 A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11:54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. Use a financial calculator or spreadsheet to find the price of the bond if its yield to maturity falls to 7% or rises to 9% What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? What is the percent error for each rule? What do you conclude about the accuracy of the two rules? Chapter 11 Problem 24 Student Name: Course Name: Student ID Course Number Coupon rate Duration years Convexity Yield to maturity Using a financial calculator the price of the bond: For yield to maturity of 7% For yield to maturity of 8% For yield to maturity of 9% Using the Duration Rule, assuming yield to maturity falls to 7% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using the Duration Rule, assuming yield to maturity increases to 9% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using Duration-with-Convexity Rule, assuming vield to maturity falls to 7% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using Duration-with-Convexity Rule, assuming yield to maturity rises to 9% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Antwer Chapter 11 Problem 24 A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration of 11:54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. Use a financial calculator or spreadsheet to find the price of the bond if its yield to maturity falls to 7% or rises to 9% What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? What is the percent error for each rule? What do you conclude about the accuracy of the two rules? Chapter 11 Problem 24 Student Name: Course Name: Student ID Course Number Coupon rate Duration years Convexity Yield to maturity Using a financial calculator the price of the bond: For yield to maturity of 7% For yield to maturity of 8% For yield to maturity of 9% Using the Duration Rule, assuming yield to maturity falls to 7% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using the Duration Rule, assuming yield to maturity increases to 9% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using Duration-with-Convexity Rule, assuming vield to maturity falls to 7% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Using Duration-with-Convexity Rule, assuming yield to maturity rises to 9% Predicted price change FORMULA Predicted price FORMULA Percentage error FORMULA Antwer

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