Question: Chapter 8: Bond Valuation and Risk Bond Valuation Problem Assignment: Assume the following information for an existing bond that provides annualcoupon payments: aDuration 3.14 Convexity-2.52

Chapter 8: Bond Valuation and Risk Bond Valuation Problem Assignment: Assume the following information for an existing bond that provides annualcoupon payments: aDuration 3.14 Convexity-2.52 Current Book Value of Bond $10 million Current (Base Case) Market Value of Bond $11 million Calculate the following: What is the current Gain/[Loss) on the Bond? What would the estimated percentage price change of the bond be for a +100BP and +2008P rate change? What would the estimated percentage price change of the bond be for a -1008P and- 2008P rate change? AWhat would the estimated Gain/ILoss) be of the bond for the rate shocks estimated above? Chapter 8: Bond Valuation and Risk Bond Valuation Problem Assign ment: Fill in the answers below from the problem: Market Value of Bond: Current Book Value of Bond: Current Gain/(Loss) of Bond: Estimated Gain/(Loss) -100BP Price Change -200BP Price Change +100BP Price Change +200BP Price Change

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