Given a 5-year annual coupon bond with a face value of $1000, coupon rate of 8.5% and a yield to maturity of 7%.

b. Calculate the Macaulay duration of this bond. (1.0 score)

c. If yield to maturity increases to 11%, calculate the price of bond after yield to maturity changes. (1.0 score)

Question 2: (3.0 scores)

A. FFF Company wants to purchase an equipment for $320,000. It will produce the following net cash flows:

Year

1

2

3