Consider a bond P with 15 year maturity, 6% coupon annually paid, yield to maturity 7%....
Consider a bond P with 15 year maturity, 6% coupon annually paid, yield to maturity 7%.
The dollar convexity is...
A. -853. 26
B. 120. 44
C. -10947
D. 10947
Homework Answers
| Period | Cash Flow | PV Cash Flow | Duration Calc | Convexity Calc |
| 0 | ($908.92) | |||
| 1 | 60.00 | 56.07 | 56.07 | 97.96 |
| 2 | 60.00 | 52.41 | 104.81 | 274.64 |
| 3 | 60.00 | 48.98 | 146.93 | 513.35 |
| 4 | 60.00 | 45.77 | 183.09 | 799.61 |
| 5 | 60.00 | 42.78 | 213.90 | 1,120.95 |
| 6 | 60.00 | 39.98 | 239.88 | 1,466.66 |
| 7 | 60.00 | 37.36 | 261.55 | 1,827.62 |
| 8 | 60.00 | 34.92 | 279.36 | 2,196.07 |
| 9 | 60.00 | 32.64 | 293.72 | 2,565.50 |
| 10 | 60.00 | 30.50 | 305.01 | 2,930.48 |
| 11 | 60.00 | 28.51 | 313.56 | 3,286.52 |
| 12 | 60.00 | 26.64 | 319.69 | 3,629.97 |
| 13 | 60.00 | 24.90 | 323.67 | 3,957.91 |
| 14 | 60.00 | 23.27 | 325.77 | 4,268.06 |
| 15 | 1,060.00 | 384.19 | 5,762.89 | 80,536.52 |
Convexity = 120.44
hence option b is correct
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