We consider bonds for A Coupon rate 8% (TAB or YTM) 8% Maturity (in years) 2 years Face value 100 Frequency 2 Sensitivity (- modified duration) -1,815

Convexity 427,733 for B Coupon rate 9% (TAB or YTM) 8% Maturity (in years) 5years Face value 100 Frequency 2 Sensitivity (- modified duration) -3,994

Convexity 2056,510 3. Using the modified sensitivity or duration (1st order approximation), estimate the values of the two bonds for a 100bp increase in market interest rates. 4. Using measures of sensitivity (or modified duration) and convexity (2nd order approximation), estimate the values of bonds A and B, for a 100 bp increase in interest rates on the Marlet.