Question: The effective annual rate j = 4% and A; = 0.5%. P(j) = $1135.05 is the price of a bond at j = 4%, and

The effective annual rate j = 4% and A; = 0.5%.

The effective annual rate j = 4% and A; = 0.5%. P(j) = $1135.05 is the price of a bond at j = 4%, and Pmac(j + Aj) = $1103.08 is the first order Macaulay approximation to the bond price at j + A; = 4.5%. a) What is the Macaulay duration of the bond Dmac(j) (calculated at j 4%)? b) What is the first order Modified approximation to the bond price calcu- lated at j A; = 3.5%

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