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1. Compute the convexity of a stock that pays annual dividends, with the first dividend of 100 payable one year from now, and subsequent dividends
1. Compute the convexity of a stock that pays annual dividends, with the first dividend of 100 payable one year from now, and subsequent dividends grow at an annual rate of 7%. The effective annual interest rate is = 9%.
2.
You are given the following with respect to a five-year option-free bond:
i) Annual coupons of (2+t)%(2+t)% are paid at the end of year tt.
ii) Par value is 1,000.
iii) The yield to maturity is 5.50%.
Calculate the convexity of this five-year annual coupon bond.
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