Problem:
The Business issues a bond with the following repayment: 50$ at the end of the first year, 10$ at the end of the second year, 100$ at the end of the third year and 5$ at the end of the fourth year.
Required:
Question 1: Calculate the value of this bond assuming a discount rate of 5%.
Question 2: Calculate the Macaulay duration of this bond.
Question 3: Calculate the effective duration assuming an increase of the discount rate from 5 to 6%.
Question 4: Assume that the Business is having a lot of difficulty filling up its MBA program. How could this affect the value of the bond?
Note: Please provide full description.