Question
A 20-year maturity bond that makes coupon payments annually has a duration of 10.865 years, convexity of 160.59, and coupon rate of 8%. The
A 20-year maturity bond that makes coupon payments annually has a duration of 10.865 years, convexity of 160.59, and coupon rate of 8%. The bond sells at a yield to maturity of 5%. If the market rate drops by 99 basis points, what would be the price change (in $) according to the duration-with-convexity rule?
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