Answer the questions for the bond below, which pays interest semi-annually. The modified duration is 3.9944 years and convexity measure is 19.7636 years. ( assume par value is $1000). Coupon rate = 9% Current yield to maturity = 8% Maturity= 5 years

1. calculate the price value of a basis point if the new yield to maturity is 8.01%

2. calculate the actual price of the bond for a 50 basis point increase in interest rates (8% to 8.5%) 3. Using duration, estimate the price of the bond for a 50 bp increase interest rates (8% to 8.5)

3. using both duration and convexity measures, estimate the price of the bond for a 50 bp increase in interest rates (8% to 8.5%)

4. compare your results in 3 and 4 and explain which is closer to the actual price