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Question 1 (10 marks) An 8% annual coupon 30-year bond is selling at 9% YTM. Its current price is $897.26 and its Macaulay Duration is

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Question 1 (10 marks) An 8% annual coupon 30-year bond is selling at 9% YTM. Its current price is $897.26 and its Macaulay Duration is 11.37 years. a) Estimate the percentage change in the bond price if the YTM drops to 8.8% based on Macaulay Duration. [Hint: Take a close look at the equation's in the lecture notes.) (8 marks) b) Estimate the change in the bond price. (2 marks)

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