Question $10$

$18pts$

Suppose the YTM of an $4\%$ coupon, $1-$year bond increases from $3\%$ to $7\%.$ The bond has a par value of $$1000.$ The coupon payments are made twice a year.

What is

$(1)$ the actual percentage price change,

the estimated percentage price change using Modified Duration,

the estimated percentage price change using both Modified Duration and convexity