Consider the following information for a traditional (option-free) fixed-rate bond where PV0 is the bond’s original price, PV+ is the new price of the bond when the yield to maturity is increased, PV_ is the new price of the bond when the yield to maturity is decreased, ∆Curve is the change in the benchmark yield curve, and ∆Yield is the change in the yield to maturity:
PV0 | PV+ | PV– | ∆Curve | ∆Yield |
99.41172 | 99.32213 | 99.50132 | 3 bps | 1 bp |
The bond’s approximate convexity is closest to:
- 0.00101.
- 1.11769.
- 10.05918.
Option C
Apply
=P1+P2-2P0/P0*(change ytm)
=99.50132+99.32213-2(99.41172)/99.41172*(0.0001)²
Just solve by using sto RCL you will get option C