1. Tht term structure is flat at 4.8%. A bond has 8 years to maturity and coupon rate 4.2%. Coupon payments are semiannual, par values are 100, and rates are expressed as semiannual APRs. (a) Compute the bond price. (b) Compute the bond's Macaulay and modified duration. Hint: You can do this in Excel. Duration formulas for bonds with semiannual coupon payments are given at the end of Lecture 3. (c) Suppose the term structure moves down by 10 basis points (recall that 1 basis point = 0.01%), still staying flat. What is the bond's new price? (d) Compute the approximate price change using duration, and compare it to the actual price change. (e) Compute the bond's new Macaulay duration after the drop in interest rates. Comment on your finding. 1. Tht term structure is flat at 4.8%. A bond has 8 years to maturity and coupon rate 4.2%. Coupon payments are semiannual, par values are 100, and rates are expressed as semiannual APRs. (a) Compute the bond price. (b) Compute the bond's Macaulay and modified duration. Hint: You can do this in Excel. Duration formulas for bonds with semiannual coupon payments are given at the end of Lecture 3. (c) Suppose the term structure moves down by 10 basis points (recall that 1 basis point = 0.01%), still staying flat. What is the bond's new price? (d) Compute the approximate price change using duration, and compare it to the actual price change. (e) Compute the bond's new Macaulay duration after the drop in interest rates. Comment on your finding