Problem $13-02$

A bond for the Chelle Corporation has the following characteristics:

Maturity $-12$ years

Coupon $-7\mathrm{.}00$ percent, paid semiannually

Yield to maturity $-6\mathrm{.}50$ percent

Macaulay duration $-8\mathrm{.}39$ years

Convexity $-85\mathrm{.}87$

Noncallable

a$.$ Calculate the approximate price change for this bond using only its duration, assuming its yield to maturity increased by $200$ basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative value, if any.

Percentage change in price:

When you are dealing with large yield changes to calculate more precise bond price change

b$.$ Calculate the approximate price change for this bond, using only duration, if its yield to maturity declined by $400$ basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative value, if any.

Percentage change in price:

c$.$ Calculate the approximate price change for this bond using both duration and convexity in the computation, once again assuming that its yield to maturity declined by $400$ basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative value, if any.

Percentage change in price:

d$.$ Discuss $($without calculations$)$ what would happen to your estimate of the price change if this was a callable bond.

When rates decline, the price of callable bond increases at a rate than the price of noncallable bond.