Homework answers / question archive /  start your answer on a new separate sheet! Note: answers without explanation receive zero points Hansie plans to expand his bond portfolio with a 3 year bond with a quarterly coupon of 1% (i

 start your answer on a new separate sheet! Note: answers without explanation receive zero points Hansie plans to expand his bond portfolio with a 3 year bond with a quarterly coupon of 1% (i

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 start your answer on a new separate sheet! Note: answers without explanation receive zero points Hansie plans to expand his bond portfolio with a 3 year bond with a quarterly coupon of 1% (i.e. the bond pays 1% interest every quarter and has a nominal value of 1,000) and an annual yield of 9%. a) Compute the price and duration of the bond Hansie is worried that the yield may change and the bond price drop. As a matter of fact, Hansie re-computes the bond price, based on the duration approximation and expected yield change and finds that the bond price declines by 8.29%. His friend Johan claims that this is only an approximation and computes the exact price change. He finds that the price declines exactly 7.92% in value. b) Which annual yield change did Hansie have in mind? C) What is the convexity of this bond for the expected yield change? d ) Give a graphical representation of the above expected change in yield, duration approximation and convexity