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Lucky Star Inc. just issued a bond with the following characteristics:
Maturity = 3 years
Coupon rate = 8%
Face value = $1,000
YTM = 10%
Interest is paid annually and the bond is noncallable.
Calculate the bonds Macaulay duration (10 points) ?Round "Present value" to 2 decimal places and "Duration" to 4 decimal place.?
Calculate the bonds modified duration (5 points)
Assuming the bonds YTM goes from 10% to 9.5%, calculate an estimate of the price change without considering convexity (5 points).
Calculate the convexity of the bond.
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