In considering bonds to buy, assume you have two bonds with the same duration: Bond ONE has a convexity of 10; and bond TWO has a convexity of 5. Which one is better to choose when interest rates are expected to fall? Explain.
In considering bonds to buy, assume you have two bonds with the same duration: Bond ONE has a convexity of 10; and bond TWO has a convexity of 5. Which one is better to choose when interest rates are expected to rise?