The change in bond's price resulting from the change in the yield can be estimated using the following formula:

$\Delta B = -DB\Delta y + \frac{1}{2}CB(\Delta y)^2$

Where:

• $\Delta B$ = The change in the bond's price resulting from the change in the yield
• $\Delta y$ = The change in the bond's yield
• $B$ = the price of the bond
• $C$ = the convexity of the bond
• $D$ = the duration of the bond

From the information given in the question:

$\Delta B = -7.5 \times 106.50 \times (-0.0175) + \frac{1}{2} \times 101 \times 106.50 \times (-0.0175)^2 = 15.62522$

The change in bond's price is positive so that the new price of the bond is:

$`$15.62`522 + 106.50 = 122.12522 \approx 122.13$$