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Consider a 17-year zero coupon bond. A. Plot the value of the bond P(y) for yields ranging from 0% to 30%. [2 points] B. Add
Consider a 17-year zero coupon bond.
A. Plot the value of the bond P(y) for yields ranging from 0% to 30%. [2 points]
B. Add to the graph the price of the same bond after 12 years have passed (i.e. it will be a 5-year zero coupon bond). [2 points]
C. Using your graph, explain what happens through time (at any given yield) to:
a. The bonds price
b. The bonds interest rate risk
c. The bonds convexity.
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