You have a 2.5% (annual) coupon bond trading at par (Price = $1,000), maturing in 3 years. Coupons are paid semi-annual. Based on the payment schedule and coupon rate, you have calculated the Duration to be 2.9089 years (you can take this as given) 4. a. Using the Duration Model, calculate estimated the percentage change in bond prices (AP/P) and dollar change in bond prices ( P) given a 2% increase in interest rates ( Rs 0.02) (8 points) b. Using the Convexity Model, calculate estimated the percentage change in bond prices (AP/P) and dollar change in bond prices (AP) given a 2% increase in interest rates (ARs 0.0218 points) Using your calculators (or Excel), calculate the Actual Price Change (S), given a 2% increase in interest rates (AR 0.02). Which model produces a more accurate prediction? (4 points) c