Assume the following characteristics for a particular bond:

Face value=$1000

Annual coupon payment=$60

(First payment due in 1 year)

Internal yield to maturity = 7%

Term= 3 years

1. Compute the Macaulay duration of the bond.
2. Given your answer to part (i), compute the approximate change in the bonds value if the internal yield fell to 6.5 percent. (You should use the duration in part (i) for this computation.)
3. Compute the actual change in the bonds value.