We currently are at t=0. An asset pays $100 from t= 1 to t= 6. At t=7,the asset pays $1100. The term structure of interest rates is flat, with all rates being 3.57%.

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2. (a)(4 points) If the interest rate goes up by 26bp, what is the approximate percentage change in the price of that asset, assuming the Taylor linear approximation? Show all your calculations. As part of your answer, you have to calculate the duration of the asset.
4. (b)(6 points) If the interest rate goes down by 39bp, what is the approximate percent- age change in the price of that asset, assuming the Taylor second-order approxi- mation? What is the actual percentage change in the price of the asset? Show all your calculations. As part of your answer, you have to calculate the convexity of the asset.