1.Duration & Convexity: AC/DC Electric has a 4-year 5% coupon bond (annual coupon payments) with a face value of $1,000. The spot rate term structure is shown in the table below.

1. Duration & Convexity: AC/DC Electric has a 4year 5% coupon bond (annual coupon payments) with a face value of $1,000. The spot rate term structure is shown in the table below. Rate Factort Flows Flows A) Calculate the discount factors, PV of the bond, Sduration (delta), Macaulay Duration and $-convexity. Put the values in the table above. B) Assume the term structure makes a 200 bps shift upward. Estimate the new price of the bond using the duration relationship. Assume the reference rate is the current xtm. C) For the same 200 bps upward shift, estimate the new price of the bond using your answer in \"B" above and the convexity correction. AP = -A$ [5:31P gm F1251 2 D) Calculate the new price of AC/DC's bond issue using the discount function after the term structure shifted up by 200 bps. Prior New Spot NEH Bond Cash PV Cash Maturity Spot Term Term. Discount Flows Flows Structure Structure Function 4.0% 6.0% 50 4.25% 6.25% 50 4.75% 6.75% 50 5.25% 7.25% 1050 E) Compare your answers in B, C & D