A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration...

80.2K

Verified Solution

Question

Finance

A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of 8%.
4.34points
Time Remaining 2 hours 42 minutes 16 seconds
02:42:16
eBook
Print
References
Check my workCheck My Work button is now enabled
Item22
Item 22 4.34 points
Time Remaining 2 hours 42 minutes 16 seconds
02:42:16
A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.
a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2
Item22
4.34points
Time Remaining 2 hours 41 minutes 51 seconds
02:41:51
eBook
Print
References
Check my workCheck My Work button is now enabled
Item22
Item 22 4.34 points
Time Remaining 2 hours 41 minutes 51 seconds
02:41:51
A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.
a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2 decimal places.)

b. What price would be predicted by the durationrule? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)
4.34points
Time Remaining 2 hours 41 minutes 22 seconds
02:41:22
eBook
Print
References
Check my workCheck My Work button is now enabled
Item22
Item 22 4.34 points
Time Remaining 2 hours 41 minutes 22 seconds
02:41:22
A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.
a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2 decimal places.)

b. What price would be predicted by the durationrule? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)

c. What price would be predicted by theduration-with-convexity rule?

d-1. What is the percent error for each rule?(Enter your answers as positive values. Do not roundintermediate calculations. Roun

Answer & Explanation Solved by verified expert

3.8 Ratings (513 Votes)

ABCDEFGH23Face value10004Coupon rate12005Market interest rate i8006Maturity30years7Annual Coupon C120D3D48Duration1154Years9Convexity192410CurrentPrice of See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of 8%.4.34pointsTime Remaining 2 hours 42 minutes 16 seconds02:42:16eBookPrintReferencesCheck my workCheck My Work button is now enabledItem22Item 22 4.34 pointsTime Remaining 2 hours 42 minutes 16 seconds02:42:16A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2Item224.34pointsTime Remaining 2 hours 41 minutes 51 seconds02:41:51eBookPrintReferencesCheck my workCheck My Work button is now enabledItem22Item 22 4.34 pointsTime Remaining 2 hours 41 minutes 51 seconds02:41:51A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2 decimal places.)b. What price would be predicted by the durationrule? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)4.34pointsTime Remaining 2 hours 41 minutes 22 seconds02:41:22eBookPrintReferencesCheck my workCheck My Work button is now enabledItem22Item 22 4.34 pointsTime Remaining 2 hours 41 minutes 22 seconds02:41:22A 30-year maturity bond making annual coupon payments with acoupon rate of 12% has duration of 11.54 years and convexity of192.4. The bond currently sells at a yield to maturity of8%.a. Find the price of the bond if its yield tomaturity falls to 7%.(Do not round intermediatecalculations. Round your answer to 2 decimal places.)b. What price would be predicted by the durationrule? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)c. What price would be predicted by theduration-with-convexity rule?d-1. What is the percent error for each rule?(Enter your answers as positive values. Do not roundintermediate calculations. Roun