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a) Calculate the Macaulay duration of a 6% annual coupon bond with a face value of 1000 and three years to maturity. Assume that all

a) Calculate the Macaulay duration of a 6% annual coupon bond with a face value of 1000 and three years to maturity. Assume that all market interest rates are 7%.

b) Consider the bond in part (a). Calculate the expected price change if interest rates drop to 6.75%. Calculate the actual price change using the discounted cash flow method.


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