Two bonds expected to exhibit negative convexity

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Reference no: EM131279853

1. Consider the following two 10-year corporate bonds that are currently callable:

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Suppose that the current market yield for 10-year corporate bonds is 7%.

a. Which of these two bonds would be expected to exhibit negative convexity?

b. For which of these two bonds would it be more appropriate to use modified duration rather than effective duration.

2. Explain what a 10-year key rate duration of 0.35 means for a portfolio?

Reference no: EM131279853

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