- 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
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 ______.
B. 0.53
C. 0.0265
A. -8.47
B. 0.53
C. 0.0265
Correct Answer: C
Convexity adjustment = 0.5 x 13.25 x (.02) x (.02) x 100 = 0.265
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 |