Convexity is desirable feature of bonds because

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Reference no: EM131826344

1. Coupon reinvestment risk arises because the yield to maturity computation implicitly assumes that all coupon flows will be reinvested at the

a. Realized yield to maturity.

b. Coupon rate.

c. Promised yield to maturity.

d. Effective rate of interest.

e. Existing yield as the coupons are paid.

2. Convexity is a desirable feature of bonds because.

a. As interest rates decline, the price of a low convexity bond increases at a decreasing rate.

b. As interest rates decline, the price of a high convexity bond increases at an increasing rate.

c. As interest rates decline, the price of a high convexity bond decreases at a decreasing rate.

d. As interest rates decline, the price of a high convexity bond decreases at an increasing rate.

e. As interest rates decline, the price of a low convexity bond decreases at a decreasing rate.

Reference no: EM131826344

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