Question: There is a 3-year annual coupon bond (face value = $100) with coupon rate at 5% and the market price of the bond is $100.

There is a 3-year annual coupon bond (face value = $100) with coupon rate at 5% and the market price of the bond is $100.

a)Use the approximation formula to show the yield to maturity of the bond is about 5%.

b)Calculate the Macaulays duration and Modified duration

c)Calculate the Convexity

e)With a 1% fall in yield-to-maturity, by what percent will the bond price change?

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