Suppose you have a 2-year bond with a coupon rate of 5% and a yield to maturity of 6%. This bond's current price is €981.67, and its Macaulay duration is 1.952 years. What is your bond's convexity? What is the expected price change if yield to maturity goes up to 8% (use the convexity augmented formula)? O a. 5.1688, -2.79% O b.5.1688, -3.79% O. 4.1688, -2.79% O d.4.1688, -3.79%

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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Suppose you have a 2-year bond with a coupon rate of 5% and a yield to maturity of 6%. This bond's current price is €981.67, and its Macaulay
duration is 1.952 years. What is your bond's convexity? What is the expected price change if yield to maturity goes up to 8% (use the convexity
augmented formula)?
O a. 5.1688, -2.79%
O b.5.1688, -3.79%
O. 4.1688, -2.79%
O d.4.1688, -3.79%
Transcribed Image Text:Suppose you have a 2-year bond with a coupon rate of 5% and a yield to maturity of 6%. This bond's current price is €981.67, and its Macaulay duration is 1.952 years. What is your bond's convexity? What is the expected price change if yield to maturity goes up to 8% (use the convexity augmented formula)? O a. 5.1688, -2.79% O b.5.1688, -3.79% O. 4.1688, -2.79% O d.4.1688, -3.79%
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