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Exercise

Dollar convexity

Calculating the dollar convexity of a bond is an important first step in using convexity to predict bond prices. In this exercise, you are going to calculate the dollar convexity of a 10 year bond paying a 2% coupon, with a yield of 3% and face value of USD 100.

Recall that the formula for dollar convexity is given by:

\( Dollar \ Convexity = Convexity \times Bond \ Price \times 0.01^2\)

numpy_financial has already been imported for you as npf.

Instructions

100 XP
  • Find the dollar convexity of a 10 year bond with a 2% annual coupon and 3% yield and print the result.