a. Use the duration (first-order) approximation models to estimate bond value increases induced by changes in interest rates (yields) to 10% for each of the bonds in Problem 10 above.

b. Use the convexity (second order) approximation models to estimate bond value increases induced by changes in interest rates (yields) to 10% for each of the bonds in Problem 10 above.

c. Find the present values of each of the bonds in Problem 10 above after yields (discount rates) change to 10%.

Data from Problem 10

Find durations and convexities for each of the following bonds:

10% five-year bond selling for $1079.8542 yielding 8%

12% five-year bond selling for $1000 yielding 12%