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Basic Question 5 of 17
What is the convexity adjustment to the percentage price change of an 11%, 15-year bond selling at par if the convexity measure is 40.625 and there is a 20 basis point change in yield?
B. 0.8125%
C. 1.625%
A. 0.01625%
B. 0.8125%
C. 1.625%
User Contributed Comments 2
| User | Comment |
|---|---|
| robbiecow | According to the CFAI book page 504, Convexity Adjustment uses .5 in the formula. |
| CJPerugini | Do not square the % Change in YTM in decimal form (0.002^2) or else your result will be off by a factor of 2. Use (0.2^2/100) instead. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
calculate and interpret convexity and describe the convexity adjustment
calculate the percentage price change of a bond for a specified change in yield, given the bond's duration and convexity
CFA® 2025 Level I Curriculum, Volume 4, Module 12.