The manager of Bank A is considering investing in a bond with a face value of $100 paying a 6% annual coupon rate. The maturity of the bond is 4 years. The coupon payment is made at the end of each year. The interest rate is currently 5%. D a) Calculate the Macaulay Duration of the bond. (20%) b) Based on your answer in question a, what would the price of bond be if the interest increases by 2% (hint: Percent change in market value of securityz Ai x is where D is 1+' Macaulay Duration)? Do you think Macaulay's Duration analysis underestimates or overestimates the interest rate risk and why? (40%) c) Suppose Bank A has 150 million loans with variable interest rate and 100 million deposits with variable interest rate, how would the profit of the bank be affected by a decrease in the interest rate? Is there any way to reduce the interest rate risk? (40%)