Problem
Estimate the convexity for each of the following three bonds, all of which trade at a yield to maturity of 8 percent and have face values of $1,000.
A 7-year, zero-coupon bond.
A 7-year, 10percent annual coupon bond.
A 10-year, 10 percent annual coupon bond that has a duration value of 6.994 years (i.e., approximately 7 years).
Rank the bonds in terms of convexity, and express the convexity relationship between zeros and coupon bonds in terms of maturity and duration equivalencies.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.