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For the following bond, Par value: $1,000 Coupon rate: 8% paid annually Time to maturity: 3 years Interest rate:...

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Question

Finance

For the following bond,

Par value: $1,000

Coupon rate: 8% paid annually

Time to maturity: 3 years

Interest rate: 3%

What is the convexity? Also, if the interest rate increases from3% to 4%, what is the price change due to the convexity?

Select one:

a. Convexity: 9.7806; price change: $.7087

b. Convexity: 11.125; price change: $.6402

c. Convexity: 10.2961; price change: $.5876

d. Convexity:11.925; price change: $.8887

Answer & Explanation Solved by verified expert
4.4 Ratings (670 Votes)
K NBond Price Coupon1 YTMk Par value1 YTMNk1K 3Bond Price 810001001 3100k 10001 31003k1Bond Price 114143PeriodCash    See Answer
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