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The following information is available for a financial asset: Asset: Bond AAA Par value: $1000 Maturity: 5 years Coupon: 7% Number of compounding per year:

The following information is available for a financial asset:

Asset: Bond AAA

Par value: $1000

Maturity: 5 years

Coupon: 7%

Number of compounding per year: 2

Interest rates: 8%

a. Calculate Macaulay and Modified duration ( give detail solution) b. What will happen to the bond price if interest rate increases by 1%?

c. By how much (in % and in $) will the bond price changes?

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