Bond duration and bond convexity, Finance Basics

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Bond duration and bond convexity

Question 1: A bond has a duration of 5 years and a yield to maturity of 9 percent. If the yield to maturity changes to 10 percent, what should be the percentage price change of the bond?

Question 2: Describe how bond convexity affects the theoretical linear price-yield relationship of bonds. What are the implications of bond convexity for estimating changes in bond prices?

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Finance Basics: Bond duration and bond convexity

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Finance Basics: Bond duration and bond convexity

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