A 30-year maturity bond making annual coupon payments with


A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 10.04 years and convexity of 147.1. The bond currently sells at a yield to maturity of 10%. a. Find the price of the bond if its yield to maturity falls to 9% or rises to 11%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) YTM Price 9% $ 11% $ b. What prices for the bond at these new yields would be predicted by the duration rule and the duration-with-convexity rule? (Do not round intermediate calculations. Round your answers to 2 decimal places.) YTM Duration Rule Duration-with- Convexity Rule 9% $ $ 11% $ $ c. What is the percent error for each rule? (Do not round intermediate calculations. Round "Duration Rule" to 2 decimal places and "Duration-with-Convexity Rule" to 3 decimal places.) Percent Error YTM Duration Rule Duration-with- Convexity Rule 9% % % 11% % %

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Financial Management: A 30-year maturity bond making annual coupon payments with
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