Discuss the Bond Property Known a Convexity

question 46

Essay

Discuss the bond property known a convexity.State the meaning of convexity in words and then illustrate the property with a graph.Use specific numbers to show an example for a $1,000 face value,6.3% coupon bond that pays interest annually and has 20 years to maturity.Assume that the existing yield to maturity is 5.8% and describe what would happen if the yield changed by 1%.Show your numbers on a graph.

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Definitions:

Quantities

Refers to the amount or number of a material or immaterial item.

Outstanding Checks

Checks that have been issued and recorded but not yet cashed or cleared by the bank.

Petty Cash Fund

A small amount of cash kept on hand for making minor, immediate purchases or reimbursements in a business.

Reimbursed

The act of compensating someone for an expense they have incurred, often related to their employment or a specific task they have undertaken.