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Suppose the YTM of a 6 % coupon, 2 - year bond increases from 5 % to 8 % . The bond has par value

Suppose the YTM of a

6 %

coupon,

2 -

year bond increases from

5 %

8 % .

The bond has par

value of $

1000 .

What is

(1)

the actual percentage price change,

(2)

the estimated percentage price

change using Modified Duration,

(3)

the estimated percentage price change using Modified

Duration and convexity?

(15

)

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