Compute the theoretical prices and modified durations

Reference no: EM133559795

Interest Rate Risk - Data & Theory

(a) Use Bloomberg to look up the price, yield, modified duration, and convexity of a 2-year and 10-year treasury security (for example, look for the following CUSIPs: 91282CHV6(2- year), 91282CHT1(10-year)).

(b) Based on the characteristics of these coupon bonds, compute the theoretical prices, modified durations, and convexities.4 Are these numbers consistent with the ones found in Bloomberg?

(c) Using the price approximation based on both duration & convexity, plot the relationship between yields and prices for yields spanning +/- 2% around the yield of each security (use a lower bound of 0 if needed).

Reference no: EM133559795

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