EBK INVESTMENTS
EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 16, Problem 22PS

A

Summary Introduction

To calculate: The value of convexity of a 5 year 8% coupon bond making initial payment at YTM of 10% using spreadsheet.

Introduction: Convexity is just a curvature between yield and bond price. Convexity measures how the bond value changes when the interest rates are changing. There are two types of convexity one is positive and other is negative.    

B

Summary Introduction

To calculate: The value of convexity of a 5 year zero-coupon bond.

Introduction: The convexity is a curve that tells us about the flow of the bond prices with respect to the interest rates. It establishes a relation between prices and yields value. Zero coupons are those bonds in which the face value is repaid at the time of maturity.   

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