1. Your client plans to retire in 20 years. She buys a 25-year, 6 % annual coupon payment bond at par

1. Find the approximate Macaulay duration for the bond, using a 10 bp increase and decrease in the yield-to-maturity and calculating the new prices per 100 of par value. Keep at least 5 decimal places.

2. What is the duration gap at the time of purchase?

3. Does this bond investment carry a risk of higher or lower interest rates?