i. Calculate the Macaulay Duration for a £7 annual coupon bond with an original face value of £100.. The bond has 4 years left to maturity and a current yield to maturity of 8%. (Show your calculations)
ii. What is the modified Duration of the bond?
iii. If 4-year yields to maturity were to suddenly increase from 8% to 8.5% and the bond in problem (i) was selling for £96.69 at 8% yield, what would you expect the bond price to be after the yield increases to 8.5%?
