- CFA Exams
- CFA Level I Exam
- Topic 7. Fixed Income
- Learning Module 13. Curve-Based and Empirical Fixed-Income Risk Measures
- Subject 1. Curve-Based Interest Rate Risk Measures
CFA Practice Question
Consider the following results for the valuation of a callable bond:
V0 = 100.525.
V+ = 99.968.
V- = 101.235.
dy = 50 basis points.
V0 = 100.525.
V+ = 99.968.
V- = 101.235.
The effective convexity of the bond is:
Correct Answer: 60.88
(V- + V+ - 2 x V0) / (V0 x dy2) = (101.235 + 99.968 - 2 x 100.525) / (100.525 x 0.0052) = 60.88.
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