1. A $1000 14-year zero coupon bond sells at a price PP to earn 4% effective. If the interest rate increases to 4.28%, let P1P1 be the new price of this bond and P2P2 be an estimate of the new price of this bond using the first-order modified approximation. Find P1P2.

2. A $1000 par value bond with 7% annual coupons maturing at par in 4 years sells at a price to yield 6% effective. If the interest rate decreases to 5.77%, Find the difference between the estimate of the new price using the first-order modified approximation and the estimate of the new price using the first-order Macaulay approximation.