A straight bond with a coupon rate of 8 percent sells at a yield to maturity of 9 percent. The bond matures in 10 years.

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A straight bond with a coupon rate of 8 percent sells at a yieldto maturity of 9 percent. The bond matures in 10 years.
a. Compute the bond’s modified duration. (Your financialcalculator will most efficiently help solve for this.) How can thisvalue be used?
b. Compute the Macaulay duration of the bond and explain what itmeans.
c. Suppose the yield to maturity was originally 7 percent.Re-compute the Macaulay duration. What does this tell you about therelationship between duration and the yield to maturity?
d. Suppose in the original question, the yield to maturitysuddenly rose by one quarter of a percent. Use duration to estimatethe new price of the bond. How does your answer compare to the newbond price calculated from the bond pricing formula. Does it differby that much? If the yield to maturity increased by 1 percent, whateffect would this have on the predicted price of the bond comparedto the actual new bond price?