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(4) A perpetuity has a level payment at the end of each year. The annual effective interest rate is 5.2%. Calculate the Macaulay duration and

(4) A perpetuity has a level payment at the end of each year. The annual effective interest rate is 5.2%. Calculate the Macaulay duration and the Macaulay con- vexity. Use these to estimate the percentage decline in the market value of the perpetuity if the annual effective interest rate increases by 50 basis points. Di, 0) 20.23077; C,00) 798.337278, down by about 8.69083%

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