Question: Could anyone make this excercise mathematticaly please? Especially % error calculations. Thanks! A 30-year maturity bond making annual coupon payments with a coupon rate of

Could anyone make this excercise mathematticaly please? Especially % error calculations. Thanks!

A 30-year maturity bond making annual coupon payments with a coupon rate of 7.5% has duration of 12.27 years and convexity of 216.28. The bond currently sells at a yield to maturity of 8%. 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 percentage error for each rule? What do you conclude about the accuracy of the two rules

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The only part that I could not get right was the Predicted new price (duration rule), Please help if you can! A 30-year maturity bond making annual coupon payments with a coupon rate of 7.5% has...

Please Answer C through E-5 A 30-year maturity bond making annual coupon payments with a coupon rate of 15.3% has duration of 11.27 years and convexity of 183.3. The bond currently sells at a yield...

1. A 30-year maturity bond making annual coupon payments with a coupon rate of 15.5% has duration of 9.96 years and convexity of 144.6. The bond currently sells at a yield to maturity of 10%. a. Find...

A 30-year maturity bond making annual coupon payments with a coupon rate of 7.5% has duration of 12.27 years and convexity of 216.28. The bond currently sells at a yield to maturity of 8%. a. Find...

A 30-year maturity bond making annual coupon payments with a coupon rate of 7.5% has duration of 12.27 years and convexity 216.28. The bond currently sells at a yield to maturity of 8%. a. Find the...

only parts E please!! A 30-year maturity bond making annual coupon payments with a coupon rate of 7.5% has duration of 12.27 years and convexity of 216.28. The bond currently sells at a yield to...

Approximating Bond Price Changes Using Duration and Convexity Rules A 30-year maturity bond making annual coupon payments with a coupon rate of 14.5% has duration of 11.32 years and convexity of...

Approximating Bond Price Changes Using Duration and Convexity Rules A 30-year maturity bond making annual coupon payments with a coupon rate of 15.5% has duration of 11.25 years and convexity of...

Approximating Bond Price Changes Using Duration and Convexity Rules A 30-year maturity bond making annual coupon payments with a coupon rate of 16.0% has duration of 10.55 years and convexity of...

On March 17, 2007, the Wildcat Oil Company began operations at its Louisiana oil field. The oil field had been acquired several years earlier at a cost of $32.5 million. The field is estimated to...

A ring of radius a = 50 mm made of thin wire of radius b = 1.0 mm was located in a uniform magnetic field with induction B = 0.50 mT so that the ring plane was perpendicular to the vector B. Then the...

$5,100,000. Logan Service expects to fly the plane 725,000 miles the first year, 1,325,000 miles each year during the second, third, and fourth years, and 800,000 miles the last year. Read the...

The project _ _ _ _ _ answers the questions of what, when, how much, and at times where.

As part of its long-range expansion and remodeling plan, Simpson Foods gathered input about the features/services its customers consider important in a grocery store. Data from 693 respondents...

The amount of work I am asked to do is reasonable.

The company encourages a balance between work and personal life.