Below is a recent quote for the Wells Fargo 5.875s08 bond.

a. Taking the price of $110.48 per $100 par as given, verify the
quoted yield, duration, convexity, current yield and accrued interest.
b. Based on the Wells Fargo 5.875s08 bond quote, explain how you could
estimate the dividend yield of Wells Fargo’s preferred stock without
actually looking it up.
c. Based on the Wells Fargo 5.875s08 bond quote, explain how you could
estimate the yield to maturity of a just issued 5-year treasury note.
d. As of 1:00 pm on August 6, the yield on this bond is 3.591% and the
price is $110.388. Compare the actual price change to the price change
estimated using duration alone and to the price change estimated using
both duration and convexity. Explain why the actual price change
differs from the estimates.

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Clarification of Question by snowbear-ga on 06 Aug 2003 18:48 PDT

YOU WILL NEED THIS INFORMATION


Bond Offering Detail	Last Updated (EST): 08-05 12:05PM

Description
Wells Fargo Fin Inc	 Coupon 	5.875	 	 Maturity 	08-15-2008
 	 CUSIP 	94975CAF4

Aa2/A+, Sr Nt, Rule 415 Shelf Reg.	

 	Date	Yield	Price	Dur.   	Cnvx.   
Maturity	08-15-2008	3.575	110.48	4.376 	22.747 
 
 
	Payment
Settlement Date 	 
Quantity	 
	
 
Principal	 11,048.00 
Accrued Interest 	      282.33 
Fees	          0.00
 
Total Payment	 11,330.33

Current Yield: 	5.318 
	 
	

Detail
Bond Type 	US Corporate Debentures
Bond Form 	Book Entry
Dated Date 	08-07-2001
1st Coupon 	02-15-2002
Payment Freq. 	Semi-Annual
1st Settlement 	08-07-2001
Coupon Type 	Fixed
	Issue Amt.	600,000,000 
OID Yield 	5.883
OID Price 	99.953
	
	Income
Annual Income 	  587.50 
Redemption Price 	  100.00 
Redemption Value 	  10,000.00 
Coupon Payments 	  3,231.25 
Int. On Int.  (3.575%)  	  304.87 
Total Income 	  13,536.12 

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