Financial Risk Manager Part 1

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Explanation:

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 5 / 2; CPT → PV = 867.481 = V₀

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 5.05 / 2; CPT → PV = 861.484 = V₊

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 4.95 / 2; CPT → PV = 873.534 = V₋

Convexity = $\frac{V_- + V_+ - 2V_0}{V_0(\Delta y^2)} = \frac{873.534 + 861.484 - 2(867.481)}{(867.481)(0.0005)^2} = 258.22$

(Book 4, Module 58.2, LO 58.f)

Explanation:

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 5 / 2; CPT → PV = 867.481 = V₀

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 5.05 / 2; CPT → PV = 861.484 = V₊

N = 2 × 22; PMT = 40 / 2; FV = 1,000; I/Y = 4.95 / 2; CPT → PV = 873.534 = V₋

Convexity = $\frac{V_- + V_+ - 2V_0}{V_0(\Delta y^2)} = \frac{873.534 + 861.484 - 2(867.481)}{(867.481)(0.0005)^2} = 258.22$

(Book 4, Module 58.2, LO 58.f)

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Last updated: June 29, 2026 at 12:47