Question: QUESTION 3 (25 MARKS) (a) i. Calculate the Macaulay duration of $1,000 four years 8% coupon bond w interest rate is 10% [10 marks] ii.

QUESTION 3 (25 MARKS) (a) i. Calculate the Macaulay duration of

QUESTION 3 (25 MARKS) (a) i. Calculate the Macaulay duration of $1,000 four years 8% coupon bond w interest rate is 10% [10 marks] ii. If the interest is paid annually. calculate this bond's modified duration [5 marks] iii. Assuming the interest rate drop from 10% to 9.5%, calculate percentage change in bond price. [5 marks]

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