CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

The convexity adjustment for a callable bond with a duration of 5.5 and convexity of -76, when the interest shock is 250 basis points, is ______.
A. -16.125
B. -11.375
C. -2.375
Explanation: Convexity adjustment = 0.5 (-76)(.025)(.025) 100 = -2.375

User Contributed Comments 5

User Comment
CocaColas Why are we squaring .025 instead of multiplying by 2?!
melmilesxx because the formula is convexity times change squared
labsbamb 2nd order estimate of bond price
=convexity * (change of YTM)exp2
lazio if you don't know the answer, choose (c). there's no time left.
etiennenguon How we CAN interprèt the convexity adjustment so far?
You need to log in first to add your comment.