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3. A financial market has a flat rate term structure and the annual market rate is i = 3.5%. Consider a financial asset that pays

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3. A financial market has a flat rate term structure and the annual market rate is i = 3.5%. Consider a financial asset that pays 1 maturity (year) 0 cash flow () 2 3 200 300 500 (a) Find the current price C (i) of the asset. (b) Find its duration D (1) (c) If the interest rate changes by Ai in to = 0, the current price changes to C(+Ai). Write the formula that gives an approximation of C (+ Ar)

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