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Basic Question 9 of 17
Consider a 10%, 12-year bond selling for 115.25, with a duration of 7.49 and a convexity of 24.75. The duration and convexity adjustments to the price for a +75 basis point shock and a -75 basis point shock, respectively, would be closest to ______.
B. 5.757; -5.757
C. -5.5479; 5.6871
A. -5.478; 5.757
B. 5.757; -5.757
C. -5.5479; 5.6871
User Contributed Comments 8
| User | Comment |
|---|---|
| sam95 | why are they using duration, if they already have estimated convexity? |
| sam95 | I got it, I was missing a part in the answer. |
| erinelize | Couldn't we just assume for this particular question that a positive shock will cause a negative adjustment to the price and vice versa, therefor leaving A as the only viable answer? |
| hardig | good catch erinelize - just noticed that as well. |
| johntan1979 | That's a wrong assumption, you two. There's negative changes in answers B and C too. |
| johntan1979 | Oh craps, sorry, I just realized the question did state "respectively", so yeah, great catch! |
| ldfrench | These formulas are like a foreign language. Not going to be able to remember them on the exam so no point in learning them. |
| Kevdharr | Remember them as best you can. Review them right before the exam starts. As soon as you can, do a brain dump and jot them down. That's what some of my co-workers have recommended doing. That way, you won't run the risk of forgetting them throughout the course of the exam. |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
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® 2025 Level I Curriculum, Volume 4, Module 12.