Price Convexity/Duration/Interest-rate Risk

(a) Compute the change in the price (in percentage terms) of a ten-year (until maturity) $100 face value zero-coupon bond that currently yields 7% when expected inaction increases from 3% to 4%.

(b) Compute the change in price, given this change in expected in action, of an identical maturity bond also originally yielding 7% that pays a 7% coupon.

(c) Which bond price moved more, in percentage terms?

(d) Redo exercises a and b for a two-year bond. Comment on the relative price movement