Bond Convexity: Definition, Formula & Examples


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question 1 of 3

_____ is a measure of the curve in the relationship between a bond's price and a bond's yield.

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1. Bond prices are calculated by taking the change in interest rates x _____ + _____.

2. If convexity is 0, then the relationship between interest rates and bond prices would be a _____.

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About This Quiz & Worksheet

Answer these helpful study questions to get an idea of what you know about the convexity of a bond. You'll be assessed on key points such as the term for the curve measurement in the relationship between a bond's yield and price and how to calculate a bond's price.

Quiz & Worksheet Goals

Discover how much you understand about these topics:

  • Relationship between bond prices and interest rates when convexity is 0
  • Basic rule when calculating bond price changes based on interest rate changes
  • Increases and decreases in interest rates and how they relate to bond prices

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about the convexity of a bond
  • Making connections - use understanding of the concept of interest rates to recognize how they're connected to bond prices
  • Information recall - access the knowledge you've gained regarding the calculations associated with figuring the price of bonds

Additional Learning

Feel free to review the lesson named Bond Convexity: Definition, Formula & Examples for more information on these key topics:

  • Percentage change example in a bond's price after interest rates have changed
  • Convexity explanation and its formula
  • The graphing of changes in bond prices and interest rates