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- 2014-8-7
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An 8-year semiannual-pay corporate bond with a 5.75% coupon is priced at $ 1 0 8.32.
This bond’s duration and reported convexity are 6.4 and 0.5. The bond’s credit spread
narrows by 75 basis points due to a credit rating upgrade. Estimate the return impact
with and without the convexity adjustment. |
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