Compute the price and the duration of a 2-years 6% semiannual coupon bond

by knowing it is traded at a yield of 7%. Consider a notional (facial value)

of $1,000. Suppose now that the interest rate increases by 0.2 percentage

points; what is the effect of such a change on the bond price?

Compute

a proper approximation, compare it with the actual change in price, and

comment on the results. What would change in your approximation if you

also took into account convexity?