In 10 years, a $200,000,000 liability is due. Only one bond is available to you: ABC company, 10 years semiannual payments, 4% YTM, 8% coupon, 3% reinvestment rate, BBB credit rating.

a. Calculate the effective duration and effective convexity. Do not provide Macaulay or Modified figures.

b. If the YTM falls by 70 basis points, provide the new price of the bond based on duration and convexity.

c. Also provide the new price of the bond based on a financial calculator.

d. If the bond is held for 5 years, provide the HPR (holding period return), assuming no change in the YTM.

e. If the bond were callable in year 4 at 101, provide the YTC (yield to call).