Question: Consider a bond with the following features: Exactly 7 years to maturity 9% coupon rate, paid semi-annually 8% yield to maturity $100 par value Part

Consider a bond with the following features: Exactly 7 years to maturity 9% coupon rate, paid semi-annually 8% yield to maturity $100 par value

Part 1. What is the bond's approximate convexity assuming a 5 bp change in its annual yield-to-maturity?

Part 2. Considering the convexity effect, what is the approximate percentage price change if the bond's yield to maturity decreases by 20 basis points. Use the formula that relies on approximate modified duration and approximate convexity

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