Consider a 3-year bond that makes semi-annual coupon payments. The annual coupon rate is 10%, the face value is $1,000 and the interest rate is 8% per year. (12 points) a. What is the duration of this bond? b. By how many percents exactly will the price increase if the yield on the bond drops to 7%? c. Calculate the convexity (Hint - you don't have to use the convexity formula)