Below are details of a semiannual bond.
Par value = 1000
Maturity 4 years
Market rate if interest (yield to Maturity) = 11% per annum; Coupon rate = 8% per year paid semiannually.
a. Find the Duration, modified duration, and Convexity of the bond.
b. If the yield changes by 1 % what will be the change in price and what will be new price?
c. Calculate the delta and the gamma.
d. Which one is a better measure of predicting price change–duration or convexity and why?