Consider a 30-year US Treasury bond with a 2.25% coupon rate and a par value of $100. The coupon payment frequency is semi-annual. This bond is priced at $97.2238 and has a 2.38% yield, a duration of 21.6 and a convexity of 589. Use a Taylor series approximation to estimate the per cent change in the price of this bond when a) the yield is increased by 100 basis points to 3.38% b) the yield is reduced by 100 basis points to 1.38% c) What do you observe about your results in a) and b)? Explain your answers clearly.

Question 4 Consider a 30-year US Treasury bond with a 2.25% coupon rate and a par value of $100. The coupon payment frequency is semi-annual. This bond is priced at $97.2238 and has a 2.38% yield, a duration of 21.6 and a convexity of 589. Use a Taylor series approximation to estimate the per cent change in the price of this bond when a) the yield is increased by 100 basis points to 3.38% b) the yield is reduced by 100 basis points to 1.38% c) What do you observe about your results in a) and b)?- Explain your answers clearly. Question 4 Consider a 30-year US Treasury bond with a 2.25% coupon rate and a par value of $100. The coupon payment frequency is semi-annual. This bond is priced at $97.2238 and has a 2.38% yield, a duration of 21.6 and a convexity of 589. Use a Taylor series approximation to estimate the per cent change in the price of this bond when a) the yield is increased by 100 basis points to 3.38% b) the yield is reduced by 100 basis points to 1.38% c) What do you observe about your results in a) and b)?- Explain your answers clearly