Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the convexity of this bond?

A) $ 9.174 $
B) $ 9.334 $
C) $ 9.627 $
D) $ 9.901 $

Question

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the convexity of this bond?

A) $ 9.174 $
B) $ 9.334 $
C) $ 9.627 $
D) $ 9.901 $

Quizplus · Accepted Answer

Using equation 6.11,and the examples outlined in this section,we can find the convexity measure of this bond.Convexity = ½(1 F1F1F1S1F1F1F10 2)4326.92/101814.95 + ½(2 F1F1F1S1F1F1F10 3)4160.50/101814.95 + ½(3 F1F1F1S1F1F1F10 4)4000.48/101814.95 + ½(4 F1F1F1S1F1F1F10 5)89 327.04/101814.95 = 9.174.

Suppose a Two-Year 9% P 9.174 9.174 9.174 B) 9.334 9.334 9.334

Suppose a Two-Year 9% P $9.174$ B) $9.334$