PPT - Duration and Convexity PowerPoint Presentation, free download - ID:280629

duration and modified duration?9. A six-year bond with a continuously compounded yield of 4% provides a 5% coupon at theend of each year. Use duration and convexity to estimate the effect of a 1% increase in theyield on the price of the bond. How accurate is the estimate?

A 30-year maturity bond making annual coupon payments with a coupon rate of 12 % has duration of 11.54 years and convexity of 192.4 . The bond currently sells at a yield to maturity of 8 %. (LO 11-3) a. Use a financial calculator or spreadsheet to find the price of the bond if its yield to maturity falls to 7 %. b. What price would be predicted by the duration rule? c. What price would be predicted by the duration-with-convexity rule? d. What is the percent error for each rule? What do you concl