Suppose a bond has 20 years left to maturity, an 8% coupon rate, pays interest semi-annually, and has a 6% yield to maturity. If this bond has a Macaulay duration of 11.23 years and a convexity of 170.26, and the yield to maturity decreases 1%, an estimate of the percent price change in the bond due to both duration and convexity would be

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The percent price change can be estimated using the formula: -Duration * ΔY + 0.5 * Convexity * (ΔY)^2. Substituting the given values: -11.23 * (-0.01) + 0.5 * 170.26 * (0.01)^2 = 0.1123 + 0.008513 = 0.120813 or 12.0813%. However, the closest choice is 11.75%, which accounts for approximation in the calculation.

Suppose a Bond Has 20 Years Left to Maturity, an 8