GE has an outstanding bond issue that is currently selling for
$110.21 to yield 6.59%. The...
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GE has an outstanding bond issue that is currently selling for$110.21 to yield 6.59%. The bond pays a semi-annual coupon of 8%and will mature in 10 years. Find the convexity of this bond usingthe approximate convexity formula. (You may use 10 basis pointchange in yield to approximate the convexity).
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1 What is Yield Yield represent what the market required rate of return 2 What is Coupon Rate Coupon rate is the interest rate on face value of bond What bond gives to market As we see in the question yield is less than coupon rate means market required rate of return is less than interest rate It means bond gives supernormal return to economy so entire world will be
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