Part 1: Duration & Convexity Calculations Suppose that a bond has the following terms: 10-years-to-maturity $1000 face value Semi-annual coupons, with an annual coupon rate of 5% Suppose that all discount rates are 6% annually, with semi-annual compounding. 1. Calculate the price of the bond. 2. Calculate the bond's modified duration 3. Calculate the bond's convexity. 4. If discount rates increase to 10%, what is the new price of the bond? Do (i) the actual calculation and (ii) approximate the new bond price using the duration and convexity. How well does the duration and convexity approximation work