D. Using the following data on the price of a bond and the corresponding interest rate (assuming a flat term structure) and regression method, estimate convexity and duration of the bond: Price 99 100 101.5 102 105 106.5 108 108.5 110.1 Interest Rate .06 .057 .052 .049 .044 .038 .033 .031 .028 42. What is the estimated value of Duration? 43. What is the estimated value of Convexity? Assignment on duration and convexity Use regression method and direct calculations to find duration and convexity given the following data on cash spot prices of a bond corresponding to spot rate of interest (assuming flat term structure): Price Rate 100 0.05 101 0.049 102 0.047 99 0.051 Using duration and convexity obtained by direct calculations, calculate the expected future price move if the bond is trading at $99 when the spot interest rate rises 20 basis points. In the direct calculations, you will need to take the average of three estimates of duration and the average of two methods of convexity. Results: (Verify that you get the following estimates) Regression Method duration = Direct Calculations duration = 3.89167 ; convexity = -2660.45428 7.43448 ; convexity = -1543.99631 Price Move using Regression estimates: -1.29732