Given a two-year coupon-paying bond (paying annual coupons) with a face value of $100,000, coupon of 8% per annum and yield of 10% per annum: (a) Calculate the duration of the bond. (b) Use the duration measure to estimate the change expected in the bond price if the yield increases to 10.5% per annum.

(c) Calculate the convexity of the bond. (d) Decide whether convexity can be used to improve the estimate of the price effect if the yield changes to 10.5% per annum. Explain your answer. Using Excel for all question