Question 4: 20 marks (a) Consider a bond selling at par with modified duration of...
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Question 4: 20 marks (a) Consider a bond selling at par with modified duration of 22-years and convexity of 415. A two 2 percent decrease in yield would cause the price to increase by 44%, according to the duration rule. What would be the percentage price change according to the duration-with-convexity rule? (10 marks) (b) Compare and contrast a financial asset and real estate and provide an example of both assets. (10 marks)
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