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Convexity of the bond

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Calculate the convexity of the ABC bond

Company Maturity (years) Coupon (%) Price Yiled to Maturity (%)
ABC 4 10 98 10.63
DEG 8 9 87 11.53
GHI 22 11 102 10.76
JKL 28 10 90 11.17

Suppose market interest rates change by 50 basis points. Estimate the new price of the ABC bond using the follosing:
a. Duration only
b. Duration and convexity

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Solution Summary

Convexity of a bond is examined for ABC.

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Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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