Calculate convexity of a bond

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Reference no: EM131881213

A. Calculate convexity of a bond that pays annual coupon rate at a rate of 7% and matures in 3 years. Assume face vale of $1000 and the bond is selling at YTM of 7.5%. Show how you found the value.

B. Suppose annual YTM for US Treasury bonds for 0.5 yr, 1 yr and 1.5 yr are 6.25%, 6.05% and 5.79%, respectively. What is the spot rate for 1.5 years? Assume bonds with maturity less than or equal to 1 year are zero-coupon bonds. Show how you found the value.

Reference no: EM131881213

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