Essay
A 9-year maturity AAA-rated corporate bond has a 6% coupon rate. The bond's promised yield is currently 5.75% and the bond sells for its FPV. The bond pays interest semiannually and has an annual duration of 7.1023 years.
a) What is the bond's convexity?
b) If promised yields decrease to 5.45%, what is the bond's predicted new price, including convexity?
c) Based on your result in b), would you prefer to have a bond with more or less convexity? Explain.
Correct Answer:
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a) Bond's convexity: 
b) With a new prom...View Answer
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Correct Answer:
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b) With a new prom...View Answer
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