1. Calculate the requested measures for bonds A and B (assume that each bond pays interest semiannually) Coupon Yield to maturity Maturity (Years) Par Price a. Price value of a basis point b. Macaulay duration c. Modified duration d. Convexity A 8% 8% 2 $100 $100 B 9% 8% 5 $100 $104.055

2. For bonds A and B in Question 1: a. Calculate the actual price of the bonds for a 100-basis-point increase in interest rates. b. Using duration, estimate the price of the bonds for a 100-basis point increase in interest rates. (Note: Please estimate the change of bond price first, then calculate the new price.) c. Using duration and convexity measures, estimate the price of the bonds for a 100-basis point increase in interest rates.

1. Calculate the requested measures for bonds A and B (assume that each bond pays interest semiannually) a. Price value of a basis point b. Macaulay duration c. Modificd duration d. Convexity 2. For bonds A and B in Question 1: a. Calculate the actual price of the bonds for a 100-basis-point increase in interest rates. b. Using duration, estimate the price of the bonds for a 100-basis point increase in interest rates. (Note: Please estimate the change of bond price first, then calculate the new price.) c. Using duration and convexity measures, estimate the price of the bonds for a 100 -basis point increase in interest rates