1. The price of a perpetuity-immediate with annual level payments of $100 is calculated at an annual effective interest rate of 4%. Estimate the new price of this perpetuity if the interest rate increases to 4.2% using the first-order modified approximation.

2. At an annual effective rate of interest of 3, a liability has a present value of $500 and a Macaulay duration of 4.72. Calculate the first-order Macaulay approximation of the present value of this liability at a new interest rate of 2.85.