2) Assume that you have a 10 year Treasury Bond with a yield of 2.76%, coupon rate of 2.35%,   paying annual coupon payments. Assume the face value of the bond is $1,000. Shock the yield on the bond by 100 basis points up and down to determine the approximate duration and approximate convexity of the bond. Determine the approximate percentage change in the price of the bond because of the effects of duration and convexity when there is a 100 basis point increase in interest rates. How does this compare to the actual changes in the bond? What would be the approximate percentage change in the price of the bond because of the effects of duration and convexity when there is a 100 basis point decrease in interest rates?    Determine if you are immunized if your planning horizon is 7.32 years. Please explain your answer.

Answer rating: 100% (QA)

To determine the approximate duration and convexity of the bond and calculate the approximate percentage change in its price due to changes in interes... View the full answer