What is the convexity of each bond

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Suppose bond A has 20 years left to maturity, an 8% coupon rate, pays interest semi-annually, and has a 6% yield to maturity and bond B has 25 years left to maturity, a 5% coupon rate, pays interest semi-annually, and has a 7% yield to maturity. What is the duration of each bond? What is the convexity of each bond? What are the optimal weights for bond A and bond B if the duration of your portfolio is 10 years? Supposed interest rate increases by 1%, estimate of the percent price change in each bond due to both duration and convexity. Which bond is preferred for a portfolio inclusion?

Reference no: EM13945303

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