Suppose bonds y and z are identical in terms of duration, Ask an Expert

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Suppose bonds Y and Z are identical in terms of duration and coupon but bond Z is more convex.

Market participants expect interest rates to fall sharply. Which bond will be preferred by investors? Which bond will have a higher required yield?

How much will investors be willing pay for the preferred bond? What determines this price? When do investors "sell convexity"?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92840752

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