A. In a recent trading session, the benchmark 30-year Treasury bonds market price went up

A1 dollars per $1000 face value to A2 dollars, while its yield fell from .07 to .068. The

bonds market price then went up another A3 dollars per $1000 face value as the yield fell

further to .0665 from .068. Report answers for the following (using average of latest two

bond prices for duration and average of latest three bond prices for convexity):

1. Convexity, using the average of all three market prices of the bond in the denominator

of the formula.

2. First modified duration, using average of first two market prices of the bond in the

denominator of the formula.

3. Second modified duration, using average of second and third prices of the bond.

4. The expected rise in bond price if the interest rate were to fall another 20 basis points

(.002) from .0665, using the average of two modified durations and convexity.

A1

A2

A3

9.38

1031.62

8.38