CFA Practice Question

There are 764 practice questions for this topic.

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 ______.

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
You need to log in first to add your comment.