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Suppose you have a perpetuity with the first payment of $1,283 made at time t=1. Each successive payment is increased by 1.2%. (so the payment stream will look like X, X(1+k), X(1+k)2, ...with the first payment at t=1). Find the value of the modified convexity at an annual effective rate of i = 4.8%. Round your answer to three decimal places. You must construct a price function and the derivative definition of convexity to calculate the answer. Failing to do so will result in a score of 0 points..

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Financial Management, Finance

Category:- Financial Management
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