Question 4. A 12.75-year maturity zero-coupon bond has convexity of 150.3 and modified duration of 11.81 years. A 30-year maturity 6% coupon bond with annual coupon payments has nearly identical modified duration of 11.79 years, but considerably higher convexity of 231.2.

Suppose the yield to maturity on both bonds increases by 1%. What percentage change in price of the bonds as predicated by the duration plus convexity model? (6)

Repeat part (a), but this time assume that the yield to maturity decreases by 1%. (6)