Question
Calculate the convexity for a three-year 4.5% coupon rate with a face value of $500,000 loan with amortised payments? Use this information to determine the
Calculate the convexity for a three-year 4.5% coupon rate with a face value of $500,000 loan with amortised payments?
Use this information to determine the impact on the market value of the amortised loan if the entire yield curve shifted downward 50-basis points.
What is the usefulness of convexity when duration is available as a measure of interest rate risk? What is the practical implication for the three-year loan in this example?
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Get StartedRecommended Textbook for
Analysis for Financial Management
Authors: Robert Higgins
11th edition
77861787, 978-0077861780
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