Before James Bond was killed in the final Daniel Craig appearance in the title role in the incredibly awful move No Time to Die, Bond learned he had a 6-year-old daughter. Bond wants to provide his daughter with a substantial financial gift on her 15^th birthday. Bond had $200,000 to invest in a specific bond and he chose a 25-year callable bond issued by Spectre Industries (coupon rate of 10%; yield to maturity of 10%).

Using sensitivity analysis, Bond estimates that a 0.5% increase in yields would cause the bond price to change to $961, while a 0.5% decrease would cause the price to change to $1,051.

1. 1.Compute and interpret the effective duration and the effective convexity
2. 2.Estimate the value of the substantial gift on the daughter’s 15^th birthday (show calculations using excel spreadsheet)