MLK Bank has an asset portfolio that consists of $200 million of 15-year, 12.5-percent-coupon, $1,000 bonds with annual coupon payments that sell at par. a-1.
What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent
What will be the new prices if market yields change immediately by ± 2.00 percent?
The duration of these bonds is 7.4620 years. What are the predicted bond prices in each of the four cases using the duration rule?
What is the amount of error between the duration prediction and the actual market values?