A newly issued bond has a maturity of $10$ years and pays a $7\mathrm{.}7\%$ coupon rate $($with coupon payments coming once annually$).$ The bond

sells at par value.

Required:

a$.$ What are the convexity and the duration of the bond?

b$.$ Find the actual price of the bond assuming that its yield to maturity immediately increases from $7\mathrm{.}7\%$ to $8\mathrm{.}7\%($with maturity still $10$

years$).$ Assume a par value of $100.$

c$.$ What price would be predicted by the modified duration rule $\%$media:$22$formula$103.$mml$\%$ What is the percentage error of that rule?

d$.$ What price would be predicted by the modified duration$-$with$-$convexity rule $\%$media:$22$formula$105.$mml$\%$ What is the percentage

error of that rule?

Complete this question by entering your answers in the tabs below.

What are the convexity and the duration of the bond? Use the formula for convexity in footnote $7.$

Note: Round "Convexity" to $3$ decimal places and "Duration" to $2$ decimal places.