1. Assuming its yield to maturity increases from 7% to 8% with maturity unchanged. Calculate the predicted price using the modified duration with convexity rule, and the percentage error of this rule.
2. A 3,000 loan at an annual effective rate of interest of 6% is repaid with 3 annual payments of 750, plus a balloon payment at the end of year 4. Determine the amount of the balloon payment
3. Ron borrows 20,000 for 20 years at annual interest rate of 10% convertible semiannually. He repays 500 in interest at the end of each 6 months. The principal and the remaining accrued interest are to be repaid at the end of 20 years by equal deposits at the end of each 6 months to a sinking fund that accumulates at 8% convertible semiannually. How much must Ron deposit in the sinking fund each 6 months?