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Consider a two-year maturity inverse floating-rate bond. Its coupon reset formula is 10%o-libor. Its discount rate is LIBOR+2%. Now it is at t=0 (this bond

Consider a two-year maturity inverse floating-rate bond. Its coupon reset formula is 10%o-libor. Its discount rate is LIBOR+2%. Now it is at t=0 (this bond was just issued). The current LIBOR is 3% and the term structure is flat.

a. What is the price of this inverse floater?

b. What is the modified duration of this inverse floater?

c. What is the convexity of this inverse floater?

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To calculate the price modified duration and convexity of the inverse floater bond well follow these steps a Price of the inverse floater The price of the bond can be calculated as the present value o... blur-text-image

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