Formula for macaulay duration and price of bond

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1. According to many experts, the main practical lesson of modern portfolio theory is that the best investment strategy – especially for the individual investor - is to “buy the index”. What are three arguments they might use to justify their position.

2. Write down and briefly explain the relation between the formula for Macaulay duration and the price of a bond.

3. Identify the 3 most important factors that make one option more expensive than another and briefly explain their impact.

Reference no: EM131928573

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