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Basic Question 12 of 17

The convexity adjustment to percentage price change for a bond that has a duration of 4.5 and a convexity of 13.25, when the interest shock is +200 basis points, would be closest to ______.

A. -8.47
B. 0.53
C. 0.0265
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User Contributed Comments 5

User Comment
cong 1/2 x ann convexity x (yield change)^2
endurance thanks cong
tomalot Why not "4.5*(.02) x 100+...."?
Teeto why sometimes there is 1/2 and sometimes not?
CFAJ 4.5 is the modified duration and we are looking for convexity adjustment so need to use the ann.convexity
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Your review questions and global ranking system were so helpful.
Lina

Lina

Learning Outcome Statements

calculate and interpret convexity and describe the convexity adjustment

calculate the percentage price change of a bond for a specified change in yield, given the bond's duration and convexity

CFA® 2024 Level I Curriculum, Volume 4, Module 12.