Calculate the approximate duration and approximate convexity, Finance Basics

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Calculate the approximate duration and approximate convexity

Problem

A 20-year 7% coupon bond is trading at 10% yield. Currently the price of the bond is 81.60. When the yield of the bond increases by 20 basis points the new price is 80.04, when the yield of the bond decreases by 20 basis points, the new price of the bond is 83.27. Calculate the approximate duration and approximate convexity measure of the bond.

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Finance Basics: Calculate the approximate duration and approximate convexity

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