Using the bond information of a 2-year 11% annual coupon bond which yields at 13 percent, a PV of $966.64, and a duration of 1.8993 years.

What is the implied price volatility of the above bond if interest rates decline by 500 basis points? (ii) What is the implied new price, i.e., the new price implied by the Duration-based IPV formula? (iii) What is the ACTUAL new price?

What is the implied price volatility of the bond in if interest rates increase by 500 basis points? (ii) What is the implied new price, i.e., the new price implied by the Duration-based IPV formula? (iii) What is the ACTUAL new price?

Plot the graph for the actual and implied new prices in each of the two instances (fall and rise in yields) using part 1 as the starting point. Submit an Excel spreadsheet with this graph. Make sure to label your axes, have a tile for the graph. Insert a statement about what you observe from the graph as to the relationship between actual and implied price volatility.