Question: Question Twelve a) Interest rate has increase by 10 basis point calculate by how much the portfolio value will change. b) A Bond has a

Question Twelve a) Interest rate has increase by 10 basis point

Question Twelve a) Interest rate has increase by 10 basis point calculate by how much the portfolio value will change. b) A Bond has a face value of C1000 and pays a coupon of 10% annually. It has five-year life. The market interest rate (yield to maturity) is 10%. (i) Find the Duration of this bond (ii) Find the convexity of this bond (iii) If the interest rate increase by 5%, by how much will the bond price decrease (iv) Compute the new price of the bond

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