Question: Macaulay duration, Modified Duration, and Duration-adjusted price change Question 2: Macaulay duration, Modified Duration, and Duration-adjusted price change (25 marks) Assume a five-year bond with

Macaulay duration, Modified Duration, and Duration-adjusted price change

Question 2: Macaulay duration, Modified Duration, and Duration-adjusted price change (25 marks) Assume a five-year bond with a face value of 51000 that pays a 5% coupon (annual coupon payment) with a yield to maturity (YTM) of 4%. a) Calculate Macaulay duration and discuss your result. (8 marks) b) Calculate Modified duration and discuss your result. (8 marks) c) Calculate Duration-adjusted price change if YTM increases from 4% to 6%, and discuss your result. (9 marks) (Show ALL workings)

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