Please answer all the parts of the questions! Thank you!

Consider four dierent bonds all having the same yield-to-maturity. Bond A is a consol that pays $50 every period forever and is currently priced at $764:29. Bond B, C and D have the same par value of $1; 000. However, they dier in their maturity and coupon rate. While bond B and C have a maturity of 5 years, bond D has a maturity of 8 years. Also, bond B and D have a coupon rate of 5% whereas bond C has a coupon rate of 7:5%.

(a) Calculate the prices for bond B, C and D.

(b) Calculate the duration for all bonds.

(c) Calculate the duration adjusted for convexity for all bonds.

(d) Suppose the yield-to-maturity increases by 1%. Calculate the price changes on the

individual bonds based on the two duration measure and based directly on the

pricing formula. Compare your answers.

(e) Suppose the yield-to-maturity decreases by 1%. Calculate the price changes on

the individual bonds based on the two duration measure and based directly on the

pricing formula. Compare your answers.