Explanation:

The approximate convexity of a bond is calculated using the formula:

$\text{ApproxCon} = \frac{(PV_{+}) + (PV_{-}) - 2 \times (PV_0)}{(\Delta Y)^2 \times (PV_0)}$

Where:

• $PV_{+}$ is the price when the yield decreases by 10 basis points (96.30).
• $PV_{-}$ is the price when the yield increases by 10 basis points (95.80).
• $PV_0$ is the original price (96.00).
• $\Delta Y$ is the change in yield (0.001 or 10 basis points).

Substituting the values:

$\text{ApproxCon} = \frac{96.30 + 95.80 - 2 \times 96.00}{(0.001)^2 \times 96.00} = \frac{192.10 - 192.00}{0.000001 \times 96.00} = \frac{0.10}{0.000096} \approx 1,042$

Option A (521) is incorrect because the denominator is mistakenly multiplied by 2, as in the calculation of approximate duration.

Option C (2,604) is incorrect because the change in yield (0.001) is not squared, leading to an erroneous calculation.