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Looking for percent error for the duration and duration w/convexity rule. A 30 year bond making annual coupon payments w/coupon rate of 9.50 has a duration of 13.53 years and a convexity of 258.03. The bond currently sells at a yield to maturity of 6%(which is 1428.05) If the bond fell to 5% witch calculates to 1691.72 with a value of 1671.22 w/duration and 1689.92 duration w/convexity. I can not calculate the percentage error for duration rule (duration w/convexity is -.13) No matter what I come up with, it’s wrong. Same for the rise to 7% - price has been calculated to1310.54, duration is 1292.88 and duration w/convexity 1312.00. (Duration w/convexity is .13) all numbers have been verified - don’t need those , just the two percent errors for the duration.

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Financial Management, Finance

Category:- Financial Management
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