Consider a 10-year bond with face value of $100.00 witch pays a coupon of 10% annually. Assume the yield is 8% annually.

• Determine an approximation for P/y as y changes from 8% annually to 7% annually. Clearly indicate if the bond price increases or decreases and determine the sign of P/y .

• Use an Excel sheet to determine an approximation for 2P/y2 . Use your estimate to determine the convexity of this bond