8. Bond A has a yield to maturity 20% and trades at $100. This bond pays...

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8. Bond A has a yield to maturity 20% and trades at $100. Thisbond pays semi-annual coupons. Face value is also $100 and time tomaturity is 3 years. a. Calculate the duration of this bond. Note:Yield to maturity is not necessarily the same as effective yield(APR vs. EAR) b. Calculate the convexity of this bond c. If yieldsdecrease by 30% (not p.p.), what is the impact on prices inpercentage terms i. Using only duration ii. Using duration andconvexity d. In question c), which result (i or ii) provides thebest approximation to the actual impact of yield movements onprices?

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8. Bond A has a yield to maturity 20% and trades at $100. Thisbond pays semi-annual coupons. Face value is also $100 and time tomaturity is 3 years. a. Calculate the duration of this bond. Note:Yield to maturity is not necessarily the same as effective yield(APR vs. EAR) b. Calculate the convexity of this bond c. If yieldsdecrease by 30% (not p.p.), what is the impact on prices inpercentage terms i. Using only duration ii. Using duration andconvexity d. In question c), which result (i or ii) provides thebest approximation to the actual impact of yield movements onprices?