10-year, 14% coupon bond, 14% yield-to-maturity

Duration = 5.3 years

Percentage change in bond price

200.00%
150.00%
100.00%

Actual price change

Price change estimated by duration

50.00%
0.00%
-50.00%
-100.00%

Change in interest rate

Percentage change in bond price

10-year, 14% coupon bond, 14% yield-to-maturity

Duration = 5.3 years, Convexity = 164.7

200.00%
150.00%

Actual price change

100.00%
50.00%

Price change estimated by duration

Price change estimated by duration and convexity

0.00%
-50.00%

-100.00%

Change in interest rate

For a 10-year, 14% coupon bond with semiannual coupon payments, FV=$10,000 and yield-to-mat
1) actual price change for yield/interest rate changes from -7% to +6.5%.
2) estimated price change from duration
3) estimated price change from convexity
4) plot all three on the same graph

Express all of these as a percentage (%) of the current price

Change in yield Actual price change Price change estimated by duration
-7.00%
140.00%
74.16%
-6.85%
134.87%
72.57%
-6.70%
129.87%
70.98%
-6.55%
125.01%
69.39%
-6.40%
120.28%
67.80%
-6.25%
115.68%
66.21%
-6.10%
111.19%
64.62%
-5.95%
106.83%
63.03%
-5.80%
102.59%
61.45%
-5.65%
98.45%
59.86%
-5.50%
94.43%
58.27%
-5.35%
90.51%
56.68%
-5.20%
86.69%
55.09%
-5.05%
82.97%
53.50%
-4.90%
79.35%
51.91%
-4.75%
75.83%
50.32%
-4.60%
72.39%
48.73%
-4.45%
69.05%
47.14%
-4.30%
65.78%
45.55%
-4.15%
62.61%
43.97%
-4.00%
59.51%
42.38%
-3.85%
56.49%
40.79%
-3.70%
53.55%
39.20%
-3.55%
50.68%
37.61%
-3.40%
47.89%
36.02%
-3.25%
45.16%
34.43%
-3.10%
42.51%
32.84%
-2.95%
39.91%
31.25%
-2.80%
37.39%
29.66%
-2.65%
34.92%
28.07%
-2.50%
32.52%
26.49%
-2.35%
30.18%
24.90%
-2.20%
27.89%
23.31%
-2.05%
25.66%
21.72%
-1.90%
23.48%
20.13%
-1.75%
21.35%
18.54%
-1.60%
19.28%
16.95%
-1.45%
17.26%
15.36%
-1.30%
15.28%
13.77%
-1.15%
13.35%
12.18%

-1.00%
-0.85%
-0.70%
-0.55%
-0.40%
-0.25%
-0.10%
0.05%
0.20%
0.35%
0.50%
0.65%
0.80%
0.95%
1.10%
1.25%
1.40%
1.55%
1.70%
1.85%
2.00%
2.15%
2.30%
2.45%
2.60%
2.75%
2.90%
3.05%
3.20%
3.35%
3.50%
3.65%
3.80%
3.95%
4.10%
4.25%
4.40%
4.55%
4.70%
4.85%
5.00%
5.15%
5.30%
5.45%
5.60%
5.75%
5.90%
6.05%
6.20%
6.35%
6.50%

11.47%
9.63%
7.84%
6.08%
4.37%
2.70%
1.07%
-0.53%
-2.09%
-3.61%
-5.10%
-6.55%
-7.97%
-9.36%
-10.72%
-12.05%
-13.35%
-14.61%
-15.86%
-17.07%
-18.26%
-19.42%
-20.55%
-21.67%
-22.75%
-23.82%
-24.86%
-25.88%
-26.88%
-27.85%
-28.81%
-29.74%
-30.66%
-31.56%
-32.44%
-33.30%
-34.14%
-34.97%
-35.78%
-36.57%
-37.35%
-38.11%
-38.86%
-39.59%
-40.30%
-41.01%
-41.70%
-42.37%
-43.04%
-43.69%
-44.32%

10.59%
9.00%
7.42%
5.83%
4.24%
2.65%
1.06%
-0.53%
-2.12%
-3.71%
-5.30%
-6.89%
-8.48%
-10.06%
-11.65%
-13.24%
-14.83%
-16.42%
-18.01%
-19.60%
-21.19%
-22.78%
-24.37%
-25.96%
-27.54%
-29.13%
-30.72%
-32.31%
-33.90%
-35.49%
-37.08%
-38.67%
-40.26%
-41.85%
-43.44%
-45.02%
-46.61%
-48.20%
-49.79%
-51.38%
-52.97%
-54.56%
-56.15%
-57.74%
-59.33%
-60.92%
-62.50%
-64.09%
-65.68%
-67.27%
-68.86%

oupon payments, FV=$10,000 and yield-to-maturity of 14% (i.e., at par) calculate the following:

es from -7% to +6.5%.

%) of the current price

Price change estimated by duration and convexity
114.50%
111.20%
107.94%
104.72%
101.53%
98.38%
95.26%
92.18%
89.14%
86.14%
83.17%
80.25%
77.35%
74.50%
71.68%
68.90%
66.16%
63.45%
60.78%
58.15%
55.55%
52.99%
50.47%
47.99%
45.54%
43.13%
40.75%
38.42%
36.12%
33.86%
31.63%
29.44%
27.29%
25.18%
23.10%
21.06%
19.06%
17.09%
15.16%
13.27%

Semiannual
Semiannual Modified
Coupon
Face value Yield
Duration
0.07
10000
0.07 10.59401

Period
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Price
654.20561
611.40711
571.40851
534.02665
499.09033
466.43956
435.92482
407.40637
380.75362
355.8445
332.56496
310.80837
290.47511
271.47207
253.71221
237.11422
221.60207
207.10474
193.55583
2765.0833
10000

Duration
654.2056
1222.814
1714.226
2136.107
2495.452
2798.637
3051.474
3259.251
3426.783
3558.445
3658.215
3729.7
3776.176
3800.609
3805.683
3793.827
3767.235
3727.885
3677.561
55301.67
10.59401

11.42%
9.60%
7.82%
6.08%
4.37%
2.70%
1.07%
-0.53%
-2.09%
-3.61%
-5.09%
-6.54%
-7.95%
-9.32%
-10.66%
-11.96%
-13.22%
-14.44%
-15.63%
-16.78%
-17.89%
-18.97%
-20.01%
-21.01%
-21.98%
-22.91%
-23.80%
-24.65%
-25.47%
-26.25%
-26.99%
-27.70%
-28.37%
-29.00%
-29.59%
-30.15%
-30.67%
-31.16%
-31.60%
-32.01%
-32.39%
-32.72%
-33.02%
-33.28%
-33.50%
-33.69%
-33.84%
-33.96%
-34.03%
-34.07%
-34.07%

e following:

Convexity Price
164.67864
10000

Convexity
1308.4112
3668.4427
6856.9022
10680.533
14972.71
19590.461
24411.79
29333.259
34267.826
39142.895
43898.574
48486.106
52866.471
57009.134
60890.931
64495.067
67810.234
70829.822
73551.217
1161335
164.67864

Percentage change in bond price

10-year, Barbell 60% coupon, 9.8% yield-to-maturity

Duration = 5.3 years, Convexity = 198.8

200.00%
150.00%

Actual price change

100.00%
50.00%

Price change estimated by duration

Price change estimated by duration and convexity

0.00%
-50.00%

-100.00%

Change in interest rate

For a 10-year bond with coupon of 60% in year 1 and 60% in year 10, with no coupon payments in
1) actual price change for yield/interest rate changes from -7% to +6.5%.
2) estimated price change from duration
3) estimated price change from convexity
4) plot all three on the same graph

Express all of these as a percentage (%) of the current price

Change in yield
Actual price change
Price change estimated by duration
-7.00%
159.22%
74.24%
-6.85%
152.92%
72.65%
-6.70%
146.82%
71.06%
-6.55%
140.90%
69.47%
-6.40%
135.17%
67.88%
-6.25%
129.61%
66.29%
-6.10%
124.22%
64.70%
-5.95%
119.00%
63.11%
-5.80%
113.94%
61.51%
-5.65%
109.03%
59.92%
-5.50%
104.27%
58.33%
-5.35%
99.65%
56.74%
-5.20%
95.17%
55.15%
-5.05%
90.83%
53.56%
-4.90%
86.62%
51.97%
-4.75%
82.53%
50.38%
-4.60%
78.57%
48.79%
-4.45%
74.72%
47.20%
-4.30%
70.99%
45.61%
-4.15%
67.37%
44.01%
-4.00%
63.86%
42.42%
-3.85%
60.46%
40.83%
-3.70%
57.15%
39.24%
-3.55%
53.94%
37.65%
-3.40%
50.83%
36.06%
-3.25%
47.80%
34.47%
-3.10%
44.87%
32.88%
-2.95%
42.02%
31.29%
-2.80%
39.25%
29.70%
-2.65%
36.57%
28.11%
-2.50%
33.96%
26.51%
-2.35%
31.43%
24.92%
-2.20%
28.97%
23.33%
-2.05%
26.58%
21.74%
-1.90%
24.26%
20.15%
-1.75%
22.01%
18.56%
-1.60%
19.82%
16.97%
-1.45%
17.69%
15.38%
-1.30%
15.63%
13.79%
-1.15%
13.62%
12.20%

-1.00%
-0.85%
-0.70%
-0.55%
-0.40%
-0.25%
-0.10%
0.05%
0.20%
0.35%
0.50%
0.65%
0.80%
0.95%
1.10%
1.25%
1.40%
1.55%
1.70%
1.85%
2.00%
2.15%
2.30%
2.45%
2.60%
2.75%
2.90%
3.05%
3.20%
3.35%
3.50%
3.65%
3.80%
3.95%
4.10%
4.25%
4.40%
4.55%
4.70%
4.85%
5.00%
5.15%
5.30%
5.45%
5.60%
5.75%
5.90%
6.05%
6.20%
6.35%
6.50%

11.67%
9.78%
7.94%
6.15%
4.41%
2.71%
1.07%
-0.53%
-2.08%
-3.59%
-5.06%
-6.49%
-7.88%
-9.23%
-10.55%
-11.83%
-13.07%
-14.29%
-15.46%
-16.61%
-17.73%
-18.82%
-19.87%
-20.90%
-21.91%
-22.88%
-23.83%
-24.76%
-25.66%
-26.54%
-27.40%
-28.23%
-29.05%
-29.84%
-30.61%
-31.36%
-32.09%
-32.81%
-33.51%
-34.19%
-34.85%
-35.50%
-36.13%
-36.74%
-37.34%
-37.93%
-38.50%
-39.06%
-39.60%
-40.13%
-40.65%

10.61%
9.02%
7.42%
5.83%
4.24%
2.65%
1.06%
-0.53%
-2.12%
-3.71%
-5.30%
-6.89%
-8.48%
-10.08%
-11.67%
-13.26%
-14.85%
-16.44%
-18.03%
-19.62%
-21.21%
-22.80%
-24.39%
-25.98%
-27.58%
-29.17%
-30.76%
-32.35%
-33.94%
-35.53%
-37.12%
-38.71%
-40.30%
-41.89%
-43.48%
-45.08%
-46.67%
-48.26%
-49.85%
-51.44%
-53.03%
-54.62%
-56.21%
-57.80%
-59.39%
-60.98%
-62.57%
-64.17%
-65.76%
-67.35%
-68.94%

1 and 60% in year 10, with no coupon payments in between (e.g., a barbell), FV=$10,000 and yield-to-maturity

nges from -7% to +6.5%.

of the current price

Price change estimated by duration and convexity
122.95%
119.29%
115.68%
112.11%
108.59%
105.11%
101.68%
98.29%
94.95%
91.65%
88.40%
85.19%
82.03%
78.91%
75.83%
72.80%
69.82%
66.88%
63.98%
61.13%
58.33%
55.57%
52.85%
50.18%
47.55%
44.97%
42.43%
39.94%
37.49%
35.09%
32.73%
30.41%
28.14%
25.92%
23.74%
21.60%
19.51%
17.47%
15.47%
13.51%

Semiannual
Semiannual Modified
Coupon
Face valueYield
Duration
0.3
10000
0.049 10.60589

Period

Price
Duration
1 2859.86654 2859.867
2 2726.278875 5452.558
3
0
0
4
0
0
5
0
0
6
0
0
7
0
0
8
0
0
9
0
0
10
0
0
11
0
0
12
0
0
13
0
0
14
0
0
15
0
0
16
0
0
17
0
0
18
0
0
19 1208.89054 22968.92
20 4993.828096 99876.56
11788.86405 10.60589

11.60%
9.73%
7.91%
6.13%
4.40%
2.71%
1.07%
-0.53%
-2.08%
-3.59%
-5.05%
-6.47%
-7.85%
-9.18%
-10.46%
-11.70%
-12.90%
-14.05%
-15.16%
-16.22%
-17.24%
-18.21%
-19.14%
-20.02%
-20.86%
-21.65%
-22.40%
-23.10%
-23.76%
-24.37%
-24.94%
-25.47%
-25.95%
-26.38%
-26.78%
-27.12%
-27.42%
-27.68%
-27.89%
-28.06%
-28.18%
-28.26%
-28.29%
-28.28%
-28.22%
-28.12%
-27.97%
-27.78%
-27.55%
-27.27%
-26.94%

10,000 and yield-to-maturity of 9.8% calculate the following:

Convexity Price
198.795 11788.86

Convexity
5719.733
16357.67
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
459378.4
2097408
198.795

1000
1.06
1.03

1
2
3
4
5
6

Time to Pay
0.5
1
1.5
2
2.5
3
0

30
30
30
30
30
1030

1.06
1.05

28.5714286
27.2108844
25.915128
24.6810742
23.505785
768.601859
898.486159

0.03179952
0.03028526
0.0288431
0.02746962
0.02616154
0.85544096
1

0.01589976
0.03028526
0.04326465
0.05493924
0.06540386
2.56632287
2.77611564

7.182

1.79542857

7.25

1.8125
1
5

9090.90909
2483.68529

0.78541924
0.21458076

11574.5944

13817.3834

1.19683282
FACE VALUE 1196.83282

0.78541924
1.07290381

5800
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

60
60
60
60
60
60
60
60
60
60
60
60
60
60
60
60
60
60
60
1060

51.7241379
44.5897741
38.4394604
33.1374659
28.5667809
24.6265353
21.2297718
18.3015274
15.7771788
13.6010162
11.725014
10.1077707
8.7135954
7.51172017
6.47562084
5.58243176
4.81244117
4.14865618
3.57642774
54.4685834
407.11

14.2467638

1.07-1.068
10000

Period

TTP
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

1400

CASH
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
9.5
10

PV
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
10700

700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
700
10700
24000

Weight
TOTAL
0.02916667 0.01458333
0.02916667 0.02916667
0.02916667
0.04375
0.02916667 0.05833333
0.02916667 0.07291667
0.02916667
0.0875
0.02916667 0.10208333
0.02916667 0.11666667
0.02916667
0.13125
0.02916667 0.14583333
0.02916667 0.16041667
0.02916667
0.175
0.02916667 0.18958333
0.02916667 0.20416667
0.02916667
0.21875
0.02916667 0.23333333
0.02916667 0.24791667
0.02916667
0.2625
0.02916667 0.27708333
0.44583333 4.45833333
1 7.22916667
14.4583333

240
13.5124611
14974.34
10000
149.7434

1009.34579

990.825688
1009.34579

73.3944954
909.014393

80
80
1080

73.3944954
67.3343995
833.958158

1.098
0.549
Period

TTP
1
2
3
4
5
6
7
8
9
10

CASH
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
9.5
10

PV
0
6000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
16000

0
5464.48087
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6281.98046
11746.4613

Weight
0
0.4652023
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.5347977
1

Ponderation
0
0.4652023
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5.34797696
5.81317927

5.29433449