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**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)

^{2}x (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. |