Question: Question 2 Consider a one - year bond with face value $ 1 0 0 0 and annual coupon rate 4 % . The coupon

Question 2
Consider a one-year bond with face value $1000 and annual coupon rate 4%. The coupon is
paid quarterly.
a) Suppose the yield-to-maturity is 5%, derive the current bond price, and its duration and
convexity.
b) Suppose the yield-to-maturity increases from 5% to 5.1%, derive the corresponding bond
price.
Question 2 Consider a one-year bond with face value $1000 and

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