Inf/RRR 8%
Bond under Consideration 7.28GS2023 FV-100
Year Coupon DCF TWDCF TW²Adjusted DCF
1 7.28 6.740741 6.740741 10.11111111
2 7.28 6.241427 12.48285 31.20713306
3 7.28 5.779099 17.3373 60.6805365
4 7.28 5.351017 21.40407 96.31831191
5 7.28...
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Inf/RRR 8%
Bond under Consideration 7.28GS2023 FV-100
Year Coupon DCF TWDCF TW²Adjusted DCF
1 7.28 6.740741 6.740741 10.11111111
2 7.28 6.241427 12.48285 31.20713306
3 7.28 5.779099 17.3373 60.6805365
4 7.28 5.351017 21.40407 96.31831191
5 7.28 4.954646 24.77323 136.252756
6 7.28 4.587635 27.52581 178.9177605
7 7.28 4.24781 29.73467 223.0100291
8 7.28 3.933157 31.46526 267.4547086
9 7.28 3.641812 32.77631 311.3749671
10 107.28 49.6914 496.914 5217.596727
PV 95.16874 701.1542 6532.924041
Duration 7.367484
Convexity 68.64569
When this Bond was issued RRR was around 7.3%
Bank did not buy at that time
Bank bought it around when RRR is 6%
So, the Buying Price was at 109.4
Now the RRR has gone up to 9% and the PV is now 88.96
So, the loss is around 18.7%
Now this Loss is calculated by DCF method
Which may or may not be equal to this loss
Convexity shows the real gain or loss
So, as by Convexity Method
Price Change when RRR moves up
(-Duration*Price Change %)+(C*Pri
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