12. Your junior fixed income analyst has suggested two bonds to be added to your existing portfolio:

A 6.5 coupon, 27-year final with annual pay, trading at 5%

A zero coupon 16 year final [annual pay] trading at 5%

You inquire about the duration and potential change in price if yields increase to 6.5%. The analyst notes that the broker has provided the following estimates for duration and convexity:

1. 27-year final with modified duration of 13.9136 and convexity of 285.48.
2. The convexiy of the zero coupon bond at 246.7
   1. You ask the analyst to determine the percent change in price FOR EACH BOND following a 150 bps INCREASE IN RATES
   2. You also ask the analyst to identify the best approach to estimate the % change in price.

Approach 1 the DURATION ONLY APPROACH and the DURATION + CONVEXITY APPROACH

Approach 2 The DURATION + CONVEXITY APPROACH.

The analyst agrees to return with all calculations completed, and EXPLAIN THE RESULTS.