Question: Question 2. Below is the information sheet for a plain vanilla bond. Characteristic Value Par Value $1,000 5 years 3% Maturity Coupon rate Compounding

Question 2. Below is the information sheet for a plain vanilla bond. Characteristic Value Par Value $1,000 5 years 3% Maturity Coupon rate Compounding Yield to maturity Annual 10 % A. What is the price of the bond? [3 marks] B. Calculate the modified duration and convexity of the bond. [4 marks] C. What is the estimated price of the bond using modified duration and convexity for a 225 bps decrease in interest rates? [3 marks]

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