- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 12. Yield-Based Bond Convexity and Portfolio Properties
- Subject 1. Bond Convexity and Convexity Adjustment
CFA Practice Question
What is the convexity adjustment to the percentage price change of an 11%, 15-year bond selling at par if the convexity measure is 40.625 and there is a 20 basis point change in yield?
B. 0.8125%
C. 1.625%
A. 0.01625%
B. 0.8125%
C. 1.625%
Correct Answer: B
Convexity adjustment = 0.5 x 40.625x (.002)2x (100) = 0.8125%
User Contributed Comments 2
| User | Comment |
|---|---|
| robbiecow | According to the CFAI book page 504, Convexity Adjustment uses .5 in the formula. |
| CJPerugini | Do not square the % Change in YTM in decimal form (0.002^2) or else your result will be off by a factor of 2. Use (0.2^2/100) instead. |