Estimated price change of a bond

[BigGuy1980]

Working throught Quesions, I found an item I need clarification on.

The first problem leaves out (.5) in the second bracket of the formula as compared to the second problem… Why is (.5) left out in the first problem as compared to the second? Is it because it has an embedded option? or is it because of using effective duration instead of annual duration?

[questions removed by admin]

[S2000magician]

@BigGuy1980

Working throught Quesions, I found an item I need clarification on.

The first problem leaves out (.5) in the second bracket of the formula as compared to the second problem… Why is (.5) left out in the first problem as compared to the second? Is it because it has an embedded option? or is it because of using effective duration instead of annual duration?

Because finance people cannot agree on whether the ½ belongs in the formula for computing convexity, or in the formula for _ using _ convexity.

Look at the article I wrote on this very conundrum: http://financialexamhelp123.com/convexity/.

[BigGuy1980]

Thank you for the reply… I can imagine these clowns sitting around a table arguing this… what a buch of pansies