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The current price of $1 par of a zero maturing at time 2 is $0.90The current price of $1 par of a zero maturing at time 3 is $0.84f) Using dollar duration alone, approximate the change in the value of $1,000,000 par of the 3-year zero given an immediate decline in all discount rates of 50 basis points.g) Using dollar duration and dollar convexity, approximate the change in the value of $1,000,000 par of the 3-year zero given an immediate decline in all discount rates of 50 basis points.
