At very high or very low levels of yield, the price curve of a bond flattens out. However, convexity measures the curvature. Thus, when the pricing curve is flat, there will be less curvature and hence the convexity adjustment will be the least.

Proceeds of bond issue: PMT = 1,125,000; I/Y = 4.80; FV = 25,000,000; N = 8; CPT PV =
2 4,511,316 Jorgensen will recognize this as a liability. Its annual interest will be, interest = 0.048 x
2 4,511,316 = 1,176,543
Jorgensen records a CFO of -1,125,000 based on the coupon payment. The analyst would reduce the
CFO by 51,543 to reflect the higher interest cost (= 1,176,543 - 1,125,000). Thus, CFO would be reduced by 51,543.