Assume the following information about a Treasury bond:

Coupon rate: 7%; maturity: November 15, 2002; settlement date: September 13, 2000; last

coupon paid: May 15, 2000; yield: 8 percent; nominal value: $100. Coupon frequency is

assumed to be semiannual and compounding frequency is assumed to be quarterly (every three

months).

(a) Compute the accrued interest, the dirty price and the clean price of this bond.

(b) Compute the $Duration and modified duration of this bond.

(c) Compute the $Convexity and relative convexity of this bond.

(d) What is the approximate dollar price change for a 200 basis point change in yield when

first order approximation is used?

(e) What is the approximate dollar price change for a 200 basis point change in yield when

second order approximation is used?

(f) What is the exact dollar price change for a 200 basis point change in yield?

(g) Conclude.