Duration and Convexity Calculators

Go to www.investinginbonds.com/story.asp?id=207. Choose the link for the general-purpose bond calculator. The calculator provides yield to maturity, modified duration, and bond convexity as the bond's price changes. Experiment by trying different inputs. What happens to duration and convexity as coupon increases? As maturity increases? As price increases (holding coupon fixed)?

Collateralized Mortgage Obligations

Go to www.bondmarkets.com/publications.asp?catid=26&image=publications. This site offers several publications in booklet form that explain various aspects of fixed-income markets. Click on the link to view the PDF for An Investor's Guide to CMOs. Answer the following questions from the information you find in the file. Explore other items that are of interest to you in this publication.

• What is another name for CMOs?
• What is dollar value of outstanding CMOs listed in the description?
• Which agency issues the greatest dollar volume of CMOs?
• Why were CMOs developed?
• What is the English translation of the word "tranche"?
• Why do CMOs have high credit quality?
• What effects do interest rates have on the values of CMOs?