Question: Manually compute the modified duration for the following bond: Maturity Date: 04/20/2017 Settlement Date: 02/05/2016 Coupon Rate: 10% Coupon Frequency: Semiannual Yield-to-Maturity: 12% Day Count

Manually compute the modified duration for the following bond:

Maturity Date: 04/20/2017

Settlement Date: 02/05/2016

Coupon Rate: 10%

Coupon Frequency: Semiannual

Yield-to-Maturity: 12%

Day Count Convention: 30/360 (European)

  1. For the bond in question 5, find the convexity for a 50 bps change in yield-to-maturity (i= 0.5%).
  2. For the bond in question, what is the percentage change in its price for a 0.5% increase in interest rate?
    1. What is the actual percentage change in price?
    2. What is the estimated percentage change in price using modified duration?
    3. What is the estimated percentage change in price using modified duration and convexity?

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