CFA Practice Question
There are 266 practice questions for this study session.
CFA Practice Question
What is the convexity of a 10%, semi-annual coupon, 12-year bond selling for 115.25 if there is a 15-basis point shock?
Correct Answer: A
Convexity = [113.99576 + 116.51707 - 2 x 115.25]/[115.25 x 0.00152] = 49.5
User Contributed Comments 14
|kalps||how do you get this anyone ?|
|Gina||Calculate YTM for P0:
PV=-115.25; N=24; PMT=5; FV=100 -> I/Y=3.9998
YTM(-15bp)=7.85 -> I/Y=3.925... ->PV(-)=116.5171
YTM(+15bp)=8.15 -> I/Y=4.075... ->PV(+)=113.9958
=49.74 (which is as close as I get to nr A)
|stefdunk||don't round the numbers. I tried 114.00 and 116.52, and got 76 (and change)|
|mtcfa||The convexity MEASURE is different from the convexity ADJUSTMENT.|
|rishtap||Should I assume every bond has a semiannual pay in the exam, or will the question be more specific?|
|raymondg||Yes bonds are always to be worked semi annual|
|jmelville||You need to round the original YTM from 7.999639 to 8.00% (i.e. down to whole basis points), however when it comes to the I/Ys you need to leave them at 3.925 and 4.075 (i.e. 3 decimal places - basis point rounding only applys to the YTMs).|
|johntan1979||Rounding the YTM is not really the big issue here (0.000361% difference). It is rounding the V- and V+ that makes a lot of difference, just like what stefdunk said. Don't round! Practice using the STO and RCL functions.|
|gill15||I still cant get over this section ---- We're this far into bonds and somebody is asking if every bond has semi annual payments...
people must be WAY too tired of CFA now that we're in Session 16
|CHUCKYT||The formula in the notes and the CFA text does not multiply the initial PV by 2 in the denominator for the convexity formula. According to the CFA text the solution here should by aprox. 49.50|
|nfressell2||Rounding the ytm certainly makes the difference|
|ascruggs92||Assume semi-annual pay unless stated otherwise. This question happens to specify for you rishtap, so no assuming is necessary.|
|ashish100||WILL SOMEONE PLEASE EXPLAIN STO AND RCL FUNCTIONS?!!
|ashish100||i got it.
if you want to store lets the number 100. you can store in ten places in keys 0 - 9.
Press 100 STO 1 to store.
Then RCL 1 to recall. It will bring up the number you stored.