Question: Assume the term structure of interest rates is flat and the market interest rate is r = 10% per year, annually compounded. (a) What are

Assume the term structure of interest rates is flat and the market interest rate is r = 10% per year, annually compounded.

(a) What are the Macaulay duration and modified duration of an annual coupon bond with a coupon rate of 5%/year, and a maturity of 10 years?

b) What is the Macaulay duration of a perpetuity that pays $10/year?

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