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A 30-year maturity bond making annual coupon payments with a coupon rate of 16.0% has duration of 10.55 years and convexity of 161.7. The bond currently sells at a yield to maturity of 9%. a. Find the price of the bond if its yield to maturity falls to 8%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond $ b. What price would be predicted by the duration rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price $ c. What price would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price $ d-1. What is the percent error for each rule? (Enter your answer 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.) Percent Error YTM Duration Rule Duration-with- Convexity Rule 8% % % d-2. What do you conclude about the accuracy of the two rules? The duration rule provides more accurate approximations to the actual change in price. The duration-with-convexity 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 10%. (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? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price $ e-3. What price would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price $ e-4. 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 10% % % e-5. Are your conclusions about the accuracy of the two rules consistent with parts (a) – (d)? Yes No.
What cash movements took place on each day of trading?- How much wealth (profit) was generated on each day of trading?
An analyst has modeled the stock of Storm using a three-factor APT model. what is Storm’s required return in percent?
You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $180 initially, and then $75 per year in maintenance costs. Machine B costs $250 initially, has a life of three years, ..
You buy a(n) five-year bond that has a 4.00% current yield and a 4.00% coupon (paid annually). In one year, promised yields to maturity have risen to 5.00%. What is your holding-period return?
A contract between BF Goodrich and the Steelworkers Union of America called for the company to spend $130 million in capital investment to keep the facilities competitive. The contract also required the company to provide buyout packages for 300 work..
Jim Lytle, a financial adviser, recommends that his clients invest in gold. Specifically, he is advising a client to invest $100,000 to purchase 175 ounces of gold bullion, with the expectation of holding the gold for a period of one year before sell..
The Boston Clothing Co. has $1,000 face value stock outstanding with a market price of $1,012. The stock pays interest annually, matures in 12 years, and has a yield to maturity of 7.842 percent. What is the current yield
Calculate the rate of return that would make the net present value of this project equal to zero,
If the yield to maturity on the debt is 9%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 32%?
Calculate the gross proceeds per share received by Turbo from the sale of the 3.06 million shares of stock.
Describe the characteristics of RestLife’s portfolio, including the portfolio’s exposures.
A debt of $4000 is repaid by payments of $1500 in nine months, $2000 in 18 months, and a final payment in 27 months. what was the amount of the final payment?
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