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Section B (2 Mark)
A bond has a convexity of 57.3. The convexity effect if the yield decreases by 110 basis points is closest to:
Suggested Answer: B
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3 comments · newest first
SH
Shawana
4 days ago
If I remember correctly, a decrease in yield should lead to an increase in bond price, so I think the answer might be positive, but I’m not confident about the exact percentage.
RO
Rolland
9 days ago
I think I practiced a similar question where we had to calculate the price change using convexity, but I can't recall the exact formula we used.
NO
Norah
14 days ago
I remember something about convexity helping to measure the sensitivity of a bond's price to changes in interest rates, but I'm not sure how to calculate the effect from the yield change.