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Calculate theconvexity forathree-year4.5% coupon rate with a face value of $500,000 loanwithamortisedpayments? Use this information to determinethe impact on the market value oftheamortisedloanif the entire

Calculate theconvexity forathree-year4.5% coupon rate with a face value of $500,000 loanwithamortisedpayments?

Use this information to determinethe impact on the market value oftheamortisedloanif the entire yield curve shifted downward50-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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