1. An asset will provide 2 cash inflows: $10,000 in year 2 and $20,000 in year 10. 

The asset is currently priced at 6% effective. 

a. What is the price of the asset? 

b. What is the ModD of the asset?

 c. What is the convexity of the asset?  

d. Estimate the price if the interest rate changes to 6.1% using only ModD

e. Estimate the price if the interest rate changes to 6.1% using both ModD and convexity

f. Determine the exact price at I 6.1% [1]

g. Which estimate in d. or e. Is better in this particular case? And Why?.4-year bond is bought at a premium. Assuming that market yields remain stable after purchase, sketch a graph showing the changes in the price of the bond with time, including the changes in price between coupon dates. Label the axes to explain the shape of the graph.

. You buy a 15 year bond at par with Face Value equal to its redemption value of $1,000. If the bond pays annual coupon of 7%,. what is the book value at the end of the 7th year?

h. What percentage of the coupon is the interest portion in the 11th year.