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A bond has 3 years to maturity, a 10% annual coupon and a par value of...

A bond has 3 years to maturity, a 10% annual coupon and a par value of $100. The bond pays a continuously compounded interest of 7%. Suppose the interest rate goes down to 6%. What would be the percentage change in the price of the bond implied by the duration plus convexity approximation?

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Expert Solution

Thus, percentage change in price implied by duration and convexity = 3.28+0.7603 = 4.08%

Workings:

jeff jeffy answered 1 year ago
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