Respuesta :
Based on the calculation done below, the percentage price change according to the duration-with-convexity rule is 25.4%.
Calculation of Percentage Price Change According to the Duration-With-Convexity Rule
The percentage price change according to the duration-with-convexity rule can be calculated using the following formula:
∆P/P = (-D*∆y) + (1/2) * (Convexity * (∆y)^2) …………………. (1)
∆P/P = Percentage change in price = ?
D = Modified duration = 10.6
∆y = Change or decrease in yield = -2%, or -0.02
Convexity = 210
Substitute the values into equation (1), we have:
∆P/P = (-10.6*-0.02) + (1/2) * (210 * (0.02)^2)
∆P/P = 0.212 + 0.042
∆P/P = 0.254, or 25.4%
Therefore, the percentage price change according to the duration-with-convexity rule is 25.4%.
Learn more about duration-with-convexity rule here: https://brainly.com/question/15991969.
