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mote1985 [20]
2 years ago
7

It is May 18, 2017. You have a $10,000 semi-annual bond with a coupon rate of 10.375% which matures May 5, 2044. The bond is pri

ced to yield 13.500%, the duration is 7.81 years, and the convexity is 99.87 years squared. Using a duration estimate only, we predict that if market yields increase by 50 basis points then the price of this bond will decrease by _________ % (percent, rounded three places after the decimal)
Business
1 answer:
Keith_Richards [23]2 years ago
3 0

Answer:

-3.91%.

Explanation:

The Duration Adjustment (% change in bond price) is given by:

= (Duration) * (Change in yield in %)

= -(7.81) x (0.5%)

= -3.91%

The Convexity Adjustment is given by:

= 0.5 * Convexity *  (Change in yield, as a fraction)^2

= 0.5 * 99.87 * (0.005)^2

= 0.5 * 99.87 * 0.000025

= 0.001248375

= 0.0012%

Thus, the convexity correction is 0.0012%

Thus, the total change in bond price = -3.91% + 0.0012% = -3.91%.

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Explanation:

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I think the answer is e
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Which of the following decision-making perspectives assumes that consumers often make purchases and reach decisions based on the
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3 0
2 years ago
Homeowners insurance covers loss of a home caused by which of the following two factors? fire inability of owner to pay mortgage
dybincka [34]

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7 0
3 years ago
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RideShare offers short-term rentals of vehicles that are kept in small lots in urban neighborhoods with plenty of potential cust
Free_Kalibri [48]

Answer:

a. Offered load = 1 lot / 4 hours = 6 cars/4 hours = 1.5 cars/hours

b. Demand rate = Total cars per 4 hours/20 minutes time

Demand rate = 6*4 / 20

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Demand rate = 1.2 cars/hours

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c. Capacity of the process = 1 lot / 5 hours

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