Problem 3: a/What is the value of a $1000 par value bond with 10 years to maturity and with a coupon rate of 8%, semi-annual payments, when using a 7.5% interest rate? b/ What is the price of the bond if the yield is increased by 10 basis points from 7.5% to 7.6%? What is the price of the bond if the yield is decreased by 10 basis points from 7.5% to 7.4%? Calculate the duration of the bond. c/What is the approximate percentage price change for a 200-basis point decrease in yield? g/What is the convexity measure? h/ Calculate the convexity adjustment to percentage price change for a 200-basis point decrease. e/ What is the new approximate percentage price change for a 200-basis point decrease? f/ Show on a graph Question: Do you think that the change will be bigger or smaller if the convexity was higher? Show on the graph