For bonds, assume coupons paid semi-annually, coupon rates and yields quoted with semi-annual compounding, and redeemable at par unless otherwise noted

1) A portfolio has a duration of 4.00 and a convexity of 40. Approximate the percent change in the portfolio's value if interest rates increase 3%.

2) Using a delta of 0.1%, calculate the effective duration and convexity of an annuity making level payments annually for three years. The annual effective rate of interest is 4%.