Question 1 A bond has a par value of $100, a time to maturity of 2 years, and a coupon rate of 10% with interest paid annually. a. The yield to maturity of the bond is 5%. What is the price of this bond? b. Suppose the yield curve is given by the following table ly 2y ? 4% The yield to maturity of a 1-year zero-coupon bond is 4%. Suppose no arbitrage opportunities exist. What is the yield of a 2-year zero-coupon bond? c. Find the modified duration of this bond. Suppose the yield increased by 5%, what your estimate of the percentage change in the bond's price using modified duration? is d. Find the convexity of this bond. What is your estimate of the percentage change in the bond's price using both modified duration and convexity?

Question 1 A bond has a par value of $100, a time to maturity of 2 years, and a coupon rate of 10% with interest paid annually. a. The yield to maturity of the bond is 5%. What is the price of this bond? b. Suppose the yield curve is given by the following table The yield to maturity of a 1-year zero-coupon bond is 4%. Suppose no arbitrage opportunities exist. What is the yield of a 2-year zero-coupon bond? c. Find the modified duration of this bond. Suppose the yield increased by 5%, what is your estimate of the percentage change in the bond's price using modified duration? d. Find the convexity of this bond. What is your estimate of the percentage change in the bond's price using both modified duration and convexity