Problem 6) Please answer it by using Excel

a) Consider a 5-year semiannual bond with a coupon of 5% (annualized) and a yield of 6.00%Calculate its price and then its duration.

b) Now calculate the price again by changing the yield to 6.50%. What is the actual percent price change relative to the price in part a)?

c) Show that

holds approximately.What is the error relative to your actual percent price change?

d) Now calculate the Convexity. Repeat part c) using

Does this reduce the error?

Note: You always use only the duration and convexity calculated for the base case in part a).