7) Consider a 10-year 10% annual coupon bond with par value of $1,000 and a yield to maturity of 9%. The modified duration of this bond is 8.75 and the convexity measure is 64.80. If the yield to maturity increases to 10.50%, the predicted percentage change in the price of the bond (due to both duration and convexity) will be: a) +10% b) -13.12% c) +12.40% d) -12.40%.

7) Consider a 10-year 10% annual coupon bond with par value of $1,000 and a yield to maturity of 9%. The modified duration of this bond is 8.75 and the convexity measure is 64.80. If the yield to maturity increases to 10.50%, the predicted percentage change in the price of the bond (due to both duration and convexity) will be: a) +10% b) -13.12% c) +12.40% d) -12.40%.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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