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Consider a $100 par value coupon-bearing bond with a 3% coupon rate and 5-year maturity....

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Finance

Consider a $100 par value coupon-bearing bond with a 3% coupon rate and 5-year maturity. The prevailing risk-free rate during the life of the bond is 6% per annum with continuous compounding.

a) Calculate the price of the bond described above (Enter numeric value only, no dollar sign or comma. Keep 2 decimal places)

b) Calculate the duration of the bond. (Enter numeric value only, no dollar sign or comma. Keep 2 decimal places)

c) Calculate the convexity of the bond (Enter numeric value only, no dollar sign or comma. Keep 2 decimal places)

d) Use the approximation given by duration and convexity, to calculate the percentage change in bond price given a 40 basis points increase in yield. (Express in %. Keep 2 decimal places, e.g. 1.23%)

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