PLEASE DO QUESTION 2 !!!! (I don't need question 1 !)

Question 1 Consider a German bank that owns a 30-year maturity Greek government bond. This bond has a 4.30% coupon rate, an annual coupon payment frequency, a par value of 100 and a 4.90% yield to maturity. What is the percent change in the price of this bond if the yield is increased by 100 basis points to 5.90%? Explain your answer clearly and comment on the result. [8 marks] Question 2 Consider the same 30-year maturity Greek government bond in question 1. This bond has a duration of 16 and a convexity of 372. a) Use the given duration to estimate the percent change in the price of this bond when the yield is increased by 100 basis points to 5.90%. What do you observe about this price change estimate compared with the actual price change you calculated in question 1? b) Use a Taylor series approximation to estimate the percent change in the price of this bond when the yield to maturity is increased by 100 basis points to 5.90%. What do you observe about this estimate? For both a) and b) you are required to explain your answers clearly. [8 marks] Question 1 Consider a German bank that owns a 30-year maturity Greek government bond. This bond has a 4.30% coupon rate, an annual coupon payment frequency, a par value of 100 and a 4.90% yield to maturity. What is the percent change in the price of this bond if the yield is increased by 100 basis points to 5.90%? Explain your answer clearly and comment on the result. [8 marks] Question 2 Consider the same 30-year maturity Greek government bond in question 1. This bond has a duration of 16 and a convexity of 372. a) Use the given duration to estimate the percent change in the price of this bond when the yield is increased by 100 basis points to 5.90%. What do you observe about this price change estimate compared with the actual price change you calculated in question 1? b) Use a Taylor series approximation to estimate the percent change in the price of this bond when the yield to maturity is increased by 100 basis points to 5.90%. What do you observe about this estimate? For both a) and b) you are required to explain your answers clearly. [8 marks]