Question: Question 11. Consider a 2-year zero coupon bond with par value of $500 and yield-to-maturity of 5%. Compute the price, duration, modified duration, and convexity.

Question 11. Consider a 2-year zero coupon bond with par value of $500 and yield-to-maturity of 5%. Compute the price, duration, modified duration, and convexity.

Question 12. Suppose you observe that the price of the bond above rises by $10. What must the change in the yield-to-maturity have been to induce this price change? First use the duration (or modified duration) approximation to find your answer. Then find the new yield directly.

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