A five-year bond with a yield of 11% (continuously compounded) pays 8% coupon at the...
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Accounting
A five-year bond with a yield of 11% (continuously compounded) pays 8% coupon at the end of each year and has a price of 86.80.
1) Calculate the duration and convexity of the bond (use continuous compounding). Interpret your results.
2) calculate the effect of a 0.2% decrease in the yield on the price of the bond. Explain why did or did you not choose both measures to approximate the price change
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