payments with a coupon rate of 15.0% has duration of 11.29 years and convexity of 184.0. The bond currently sells at a yield to maturity of 8%. Required: 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.) Answer is complete but not entirely correct. b. What price would be predicted by the duration rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct.c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. d-1. What is the percent error for each rule, if its yield to maturity falls to 7%? (Enter your answers as a positive value. Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct.d-2. What do you conclude about the accuracy of the two rules? The duration -with- convexity rule provides more accurate approximations to the actual change in price. The duration rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond if it's yield to maturity rises to 9%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond e-2. What price would be predicted by the duration rule, if it's yield to maturity rises to 9% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price d.2. What do you renclude about the aneury of the ton n The dust on with convexity nulo provides more accurate approximations to the actual change in pric The duration rule provides more accurate approximations to the actual change in price e-1. Po the price of the bond its led to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places) Pe of the brand e-2. What price would be predicted by the duration nude, if a yield to rtunity rises to 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places)

payments with a coupon rate of 15.0% has duration of 11.29 years and convexity of 184.0. The bond currently sells at a yield to maturity of 8%. Required: 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.) Answer is complete but not entirely correct. b. What price would be predicted by the duration rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct.c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. d-1. What is the percent error for each rule, if its yield to maturity falls to 7%? (Enter your answers as a positive value. Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct.d-2. What do you conclude about the accuracy of the two rules? The duration -with- convexity rule provides more accurate approximations to the actual change in price. The duration rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond if it's yield to maturity rises to 9%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond e-2. What price would be predicted by the duration rule, if it's yield to maturity rises to 9% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price d.2. What do you renclude about the aneury of the ton n The dust on with convexity nulo provides more accurate approximations to the actual change in pric The duration rule provides more accurate approximations to the actual change in price e-1. Po the price of the bond its led to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places) Pe of the brand e-2. What price would be predicted by the duration nude, if a yield to rtunity rises to 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places)

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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Transcribed Image Text:payments with a coupon rate of 15.0% has duration of 11.29 years and convexity of 184.0. The bond currently sells at a yield to maturity of 8%. Required: 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.) Answer is complete but not entirely correct. b. What price would be predicted by the duration rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct.c. What price would be predicted by the duration-with-convexity rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. d-1. What is the percent error for each rule, if its yield to maturity falls to 7%? (Enter your answers as a positive value. Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Answer is complete but not entirely correct.d-2. What do you conclude about the accuracy of the two rules? The duration -with- convexity rule provides more accurate approximations to the actual change in price. The duration rule provides more accurate approximations to the actual change in price. e-1. Find the price of the bond if it's yield to maturity rises to 9%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond e-2. What price would be predicted by the duration rule, if it's yield to maturity rises to 9% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price d.2. What do you renclude about the aneury of the ton n The dust on with convexity nulo provides more accurate approximations to the actual change in pric The duration rule provides more accurate approximations to the actual change in price e-1. Po the price of the bond its led to maturity rises to 9% (Do not round Intermediate calculations. Round your answer to 2 decimal places) Pe of the brand e-2. What price would be predicted by the duration nude, if a yield to rtunity rises to 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places)

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