1. Consider a bond that has 1 year until maturity. The bond pays a coupon of 3% quarterly, has a face value of $10,000, and the yield to maturity for similar bonds is 5%. a. What are the duration, modified duration, and convexity of this bond? Dur = 0.9888 Mod Dur = 0.9766 Convex = 1.2011 b. If the yield to maturity were to shift downward by 0.25% (aka 25 basis points), what do duration by itself and both duration and convexity predict the price change will be? Dur Only => $23.94 Dur and Convex => $23.98

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