1. You currently own a bond that has a 3% coupon rate, pays coupons annually, has exactly 3 years to maturity, and trades at a yield to maturity of 2.2%. If you hold the bond for one year and then sell it, and the yield to maturity when you sell has risen to 2.5%, what is your holding period return on the bond?

2. Regarding bond convexity and callability, a) Is the convexity of a callable bond larger or smaller than the convexity of a non-callable bond, if their other features are the same?

b) Would the convexity difference be larger at high interest rates or low interest rates, and why?