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3. Properties of Bond Duration

e. explain how a bond’s maturity, coupon, and yield level affect its interest rate risk;

What kind of convexity does a callable bond exhibit at different yield levels? A callable bond exhibits positive convexity at high yield levels and negative convexity at low yield levels.

What is the difference in value between a putable bond and an option-free bond? The difference between the value of a putable bond and the value of an otherwise comparable option-free bond is the value of the embedded put option.