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1. What is Duration? How does this measure differ from Maturity (2 points) 2. What is Convexity? How does it differ from Duration? (2 points)

1. What is "Duration"? How does this measure differ from "Maturity" (2 points) 2. What is "Convexity"? How does it differ from "Duration"? (2 points) Calculation the Duration Gap for following for 5-year Loan A paying 4.5% per year and 3-year Certificate of Deposit paying 3.75% per year. Both the loan and CD are paid annually. (6 points) 3

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