Given a 10 year ZCB trading with a 5% yield, calculate the modified duration of the bond
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Question:
Given a 10 year ZCB trading with a 5% yield, calculate the modified duration of the bond and determine the price change given an instantaneous shift in yields by 1%. What would be the difference in the calculated price change if a convexity adjustment is applied? Would this adjustment be larger given a larger shift in yields?
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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