A newly issued bond with face value Rs. 1000 has a maturity of 3 years and pays a 10% coupon annually. The bond sells at par value with YTM x%. Required: What are the convexity and duration of the bond? Find the actual price of the bond assuming that its YTM immediately increases from 100 basis points (with maturity still 3 years). What price would be predicted by the duration rule? What is the percentage error of that rule? What price would be predicted by the duration with convexity rule? What is the percentage error of that rule?

Value of x= 7; value of xx=97