Question: Problem 1 (30 points): Lucky Star Inc. just issued a bond with the following characteristics: Maturity = 3 years Coupon rate=8% Face value=$1,000 YTM=10%

Problem 1 (30 points): Lucky Star Inc. just issued a bond with

Problem 1 (30 points): Lucky Star Inc. just issued a bond with the following characteristics: Maturity = 3 years Coupon rate=8% Face value=$1,000 YTM=10% Interest is paid annually and the bond is noncallable. a. Calculate the bond's Macaulay duration (10 points) (Round "Present value" to 2 decimal places and "Duration" to 4 decimal place.) b. Calculate the bond's modified duration (5 points) c. Assuming the bond's YTM goes from 10% to 9.5%, calculate an estimate of the price change without considering convexity (5 points). d. Calculate the convexity of the bond. (10 points)

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