A 7-year $500 par value bond has annual coupons with 3.7% annual coupon rate. It is yielding at an annual effective rate of 3.25%. (a) Calculate the Modified duration of the bond.(b) Estimate the price of the bond if the yield rate increases by 0.75% using the first-order modified approximation. (c) Estimate the price of the bond if the yield rate decreases by 0.25% using the first-order Macaulay approximation.
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