Question
1.Using excel, plot graphs of the modified duration and convexity versus the note (contract) rate c (for 1% c 20%) of a 30 year, fully
1.Using excel, plot graphs of the modified duration and convexity versus the note (contract) rate c (for 1% c 20%) of a 30 year, fully amortizing, fixed rate, par mortgage. Annotate cells to show work. Assume that the mortgage never prepays/curtails, nor does it ever default.
2.Use the duration and convexity for c=5% in the previous question to plot the percentage error in the percentage price change in the mortgage when yields change in the range of -3% to +3%, using a. Duration only, and b. Duration and convexity together. Assume par pricing today.
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