Question
Bond A has an 8% coupon rate, paid annually. Maturity is in three years. The bond sells at par value $1000 and has a convexity
Bond A has an 8% coupon rate, paid annually. Maturity is in three years. The bond sells at par value $1000 and has a convexity of 9.3. The duration of the bond is 2.78. If the interest rate increases from 8% to 9.5%, what price would be predicted by the duration-with- convexity rule?
| A. | 963.43 | |
| B. | 962.43 | |
| C. | 964.42 | |
| D. | 965.35 |
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