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1. A bank quotes you a rate of 7% on a CD, compounded quarterly. What is the effective annual rate? 2. A bond that has

1. A bank quotes you a rate of 7% on a CD, compounded quarterly. What is the effective annual rate?

2. A bond that has an annual coupon rate of 15% has two years to maturity. If the current discount rate is 8%, what is the bonds Macaulays duration?

3. A bonds Macaulay duration is 7.95 years. If the current annual interest rate is 7%, what is the modified duration of this bond?

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