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Question Twelve a) Interest rate has increase by 10 basis point calculate by how much the portfolio value will change. b) A Bond has a

Question Twelve a) Interest rate has increase by 10 basis point calculate by how much the portfolio value will change. b) A Bond has a face value of C1000 and pays a coupon of 10% annually. It has five-year life. The market interest rate (yield to maturity) is 10%. (i) Find the Duration of this bond (ii) Find the convexity of this bond (iii) If the interest rate increase by 5%, by how much will the bond price decrease (iv) Compute the new price of the bond

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