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Explain the duration model

You have been freshly hired and your line manager is asking you to use the duration model in order to assess the interest rate risk related to the loan portfolio. Explain what is the duration model? As duration is a linear approach, how can you improve its inaccuracy and its weakness in evaluating value-at-risk?

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## Q : Calculate the implied arc price elasticity of demand

Arc Price Elasticity. Assume that amazon.com cut the price on a 1.10 ct Princess Cut Diamond Solitaire engagement ring from $4,500 to $2,500, and sales rose from 50 to 75 units per week. Calculate the implied arc price elasticity of demand.