Question 1 - Macaulay Duration of Bond Portfolio + Modified Duration (8 marks] (a) An investor decides to construct a bond portfolio made up of $10,000 in the 4-year 5% coupon bond and $30,000 in a 3-year zero coupon bond. Assume the par value of bond is $1000 and the market interest rate = 4%. What is the Macaulay duration of this bond portfolio? (4 marks) (b) Estimate, using modified duration, the change in the price of the 4-year 5% coupon bond if the market interest rate decreases from 4% to 3%. (4 marks)