If the cash flow is a single payment of F = $1000.00 at time t = 10, then P(i)=$1000(1+i)10. Leti0 =10%=.1andcalculateP(.1),M(.1),C(.1).

(b)(10 points) Use the quantities you just calculated in (a) to calculate the first and second order approximations to P(.09). Compare with the exact P(.09) = $1000(1.09)10.

In terms of the Macaulay duration D there's a more accurate first order formula