Solutions to in-calss exercises_Chapter 7

Solutions to in-calss exercises_Chapter 7 - 2 )) = 816.33....

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1 Solution to in-class exercise 1   Answer  C)
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2 Solution to in-class exercise 2   Answer  D)
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3 Solution to in-class exercise 3 Answer  B)
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4 Solution to in-class exercise 4   Answer D    The duration of this bond = (101 – 96) / (2 × 98  × 0.0025) = 10.20. The convexity of this bond  = (96 + 101 – 2 × 98) / (2 × 98 × (0.0025
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Unformatted text preview: 2 )) = 816.33. So when the yield rises by 50 basis points, the bond price roughly drops by [-10.2 0.005 100 + 816.33 (0.005 2 ) 100] = 3.06, or 3.06%, to 95% of the par, or 95...
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This note was uploaded on 05/01/2011 for the course ADMS 4504 taught by Professor Lee during the Fall '08 term at York University.

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Solutions to in-calss exercises_Chapter 7 - 2 )) = 816.33....

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