Exercise

Combining duration and convexity

Now let's combine everything you have learned in the last few chapters by using both duration and convexity to predict bond price changes. Take a 7 year bond that pays an annual coupon of 3% and has a yield to maturity of 4%.

numpy_financial has already been imported for you as npf.

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Find the price of a 7 year bond that pays an annual coupon of 3% and has a yield to maturity of 4%, then shift the yields up and down 1% and reprice.