The Clarence Corporation has issued bonds that pay semiannually with the following

characteristics:

Coupon

Yield to Maturity

Maturity

Macaulay Duration

$8\%$

$8\%$

$15$ years

$10$ years

a$.$ Calculate modified duration using the information provided.

b$.$ Explain why modified duration is a better measure than maturity when calculating the

bond$$s sensitivity to changes in interest rates.

c$.$ Identify the direction of change in modified duration if:

$(1)$ The coupon of the bond were $4$ percent, not $8$ percent.

$(2)$ The maturity of the bond were $7$ years, not $15$ years

d$.$ Define convexity and explain how modified duration and convexity are used to

approximate the bond$$s percentage change in price, given a large change in interest

rates. Do it on excel. Thanks