D6 Duration and Convexity (Part 2): A bond portfolio consists of a two-year zero-couponbond with a face value of $4,000 and a 15-year zero-coupon bond with a face value of$8,000. The current yield on these bonds is 10% per annum (continuouslycompounded). Assume a 2% per annum increase in yields, please calculate the actualpercentage change in the portfolio value and compare it with the estimated percentagechanges in the portfolio value using two methods: (1) applying duration alone, (2)applying duration and convexity.Select one:O a. Actual change = -11.68%; estimated changes: (1) = -13.17%, (2)=-11.53%O b. Actual change = -12.73% ; estimated changes: (1) = -11.97%, (2) = -12.57%O c. Actual change = -13.35%; estimated changes: (1) = -13.47%, (2) = -13.22%O d. Actual change = -14.21% ; estimated changes: (1) = -14.78%, ( 2 ) = -14.56%

Answered: Image /qna-images/answer/f272ae1b-d81c-4e22-b2ac-cd3c36fca954.jpg

Answered: Duration and Convexity (Part 2): A bond…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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