Calculation Of Duration And Convexity Of Bonds

Question

Given the two bonds in the table below, calculate duration and convexity for each of them, and decide which bond an investor should purchase if the investor is allowed to hold only one of them. Explain why.

 

Face Value

Coupon Rate

Maturity

Yield to Maturity

Bond A

$1,000

9.0%

10 years

9.0%

Bond B

$1,000

3.1%

8 years

9.0%

 

Total Word Count 70

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