A $1,000 par bond with 22 years to maturity and a 4% semiannual coupon has a yield to maturity of 5%. Assuming a 5 basis point change in yield, what’s the convexity of this bond？
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Answer: A
N = 2×22; PMT = 40/2; FV = 1,000; I/Y = 5/2; CPT→PV = 867.481 = V0
N = 2×22; PMT = 40/2; FV = 1,000; I/Y = 5.05/2; CPT→PV = 861.484 = V+
N = 2×22; PMT = 40/2; FV = 1,000; I/Y = 4.95/2; CPT→PV = 873.534 = V-
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