Assume a 4-year, $2,500 par value bond paying a 8% coupon semiannually and a YTM of 11%. The prime rate is 7%. There will be a charge of 65 basis points in fees and will have an 18% compensating balance imposed. The reserve requirement is 10%. The Treasury Note is yielding 3.25%. If the loan defaults, the bank will lose 85% of its money. Assume there is a concern of an increase in yields of 2%. The ROE (cost of funds) is 8.5%.

What is the convexity factor?