A newly issued bond has the following characteristics:

a. Calculate modified duration using the information above.
b. Explain why modified duration is a better measure than maturity when calculating the bond€™s sensitivity to changes in interest rates.
c. Identify the direction of change in modified duration if:
i. The coupon of the bond were 4%, not 8%.
ii. The maturity of the bond were 7 years, not 15 years.
d. Define convexity and explain how modified duration and convexity are used to approximate the bond€™s percentage change in price, given a change in interestrates.

Coupon Yield to Maity Maturity Macaulay Duration 8% 15 years 10 years 8%