# Effective Bond Duration; effective convexity; price change

Not what you're looking for?

Problem:

5.Calculate the effective duration of a bond to a 100 basis point change in interest rates with a 6-1/4 coupon, 10-years remaining to maturity, and an asking quote of 110.7811 (decimal, not 32nds).

Calculate the effective convexity to a 100 basis point change of the bond in Question 5.

Calculate the total percentage price change (duration and convexity) to a 65 basis point decrease in interest rates for the bond in Questions 5 and 6.

##### Purchase this Solution

##### Solution Summary

Solution describes the steps for calculating effective bond duration, effective convexity and total percentage price change.

##### Solution Preview

Please refer attached file for complete description. Some of formulas may be missing here.

Solution:

Calculate the effective duration of a bond to a 100 basis point change in interest rates with a 6-1/4 coupon,

10-years remaining to maturity, and an asking quote of 110.7811 (decimal, not 32nds).

Face Value of bond=100

Price of bond Po=110.7811

Coupon rate 6.25% of face value=6.25

Time to maturity=10 years

Let us calculate YTM of a bond using IRR function in MS Excel

Year End Cash flow

0 -110.7811 (Price of bond)

1 6.25 Coupon payment

2 6.25 Coupon payment

3 6.25 Coupon payment

4 6.25 ...

###### Education

- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India

###### Recent Feedback

- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

##### Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

##### Operations Management

This quiz tests a student's knowledge about Operations Management

##### Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

##### Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking