Response to the following questions:
1. A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%. What is the modified duration of this bond?
2. A bond has a Macaulay duration of 8.62 and is priced to yield 8%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7.5%, what will be the bond's percentage change in price? Comment on your findings.