A corporate bond portfolio has a modified duration of 5.35. Current interest rates are flat at 4.0%.

1. 1. Estimate the approximate percentage change in the value of the portfolio if interest rates rise to 5.25%.

1. 2. Do fixed-rate bonds with specific stated maturities have positive or negative convexity? Is this a good or bad thing?

1. 3. Calculate the Macaulay duration of a 4-year, 3% coupon annual pay bond assuming current interest rates are flat at 4.625%.