S. Andam/ W.M. Onsongo troduction terest rate risk fective aration uration onvexity amunization Example 2 Find an expression for the convexity of the cashflows arising from a lump sum deposited in a bank account that pays simp interest at a constant rate at the end of each year. Assume that the lump sum is invested for an indefinite term. Question 2 Calculate, using 10% pa interest, the convexity of the followi assets, each of which has a discounted mean term of 11 years Comment on your answers. 0 Asset A is an 11-year zero coupon bond. Asset B will provide a lump sum payment of 9,663 in 5 years' time and a lump sum payment of 26,910 in 20 years' time. * Asset C is a level annuity of 1 pa payable annually in arrears for 50 years. S. Andam/ W.M. Onsongo troduction terest rate risk fective aration uration onvexity amunization Example 2 Find an expression for the convexity of the cashflows arising from a lump sum deposited in a bank account that pays simp interest at a constant rate at the end of each year. Assume that the lump sum is invested for an indefinite term. Question 2 Calculate, using 10% pa interest, the convexity of the followi assets, each of which has a discounted mean term of 11 years Comment on your answers. 0 Asset A is an 11-year zero coupon bond. Asset B will provide a lump sum payment of 9,663 in 5 years' time and a lump sum payment of 26,910 in 20 years' time. * Asset C is a level annuity of 1 pa payable annually in arrears for 50 years