A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 11.36 years and convexity of 186.4. The bond currently sells at a yield to maturity of 8%. a. Find the price of the bond if its yield to maturity falls to 7%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule? (Do not round Intermediate calculations. Round your answer to 2 decim places.) Predicted price c. What price would be predicted by the duration-with-convexity rule? (Do not round Intermediate calculations. Round your ans to 2 decimal places.) Predicted price

A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 11.36 years and convexity of 186.4. The bond currently sells at a yield to maturity of 8%. a. Find the price of the bond if its yield to maturity falls to 7%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule? (Do not round Intermediate calculations. Round your answer to 2 decim places.) Predicted price c. What price would be predicted by the duration-with-convexity rule? (Do not round Intermediate calculations. Round your ans to 2 decimal places.) Predicted price

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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