1. You currently own a bond that has a 3% coupon rate, pays coupons annually, has exactly...
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1. You currently own a bond that has a 3% coupon rate, pays coupons annually, has exactly 3 years to maturity, and trades at a yield to maturity of 2.2%. If you hold the bond for one year and then sell it, and the yield to maturity when you sell has risen to 2.5%, what is your holding period return on the bond?
2. Regarding bond convexity and callability,
a) Is the convexity of a callable bond larger or smaller than the convexity of a non-callable bond, if their other features are the same?
b) Would the convexity difference be larger at high interest rates or low interest rates, and why?
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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