A 30-year-old maturity bond making annual coupon payments at 12% has a duration of 11.54...
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Finance
A 30-year-old maturity bond making annual coupon payments at 12% has a duration of 11.54 years and convexity of 192.4. The bond currently sells at a yield to maturity of 8%. The price of the bond if its yield to maturity falls to 7% or rises to 9% is
Yield to maturity Price
7% 1620.45
8% 1,450.31
9% 1,308.21
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?
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