Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Duration is often referred to as the approximate percentage change in the price for a 1% change in rates. Now, we will see some other definitions or interpretations of duration.
Duration is the "First Derivative"
Duration is also referred to as the "first derivative of the price/yield function". A derivative used in this context is obtained by differentiating a mathematical function. When a bond is written in the form of a mathematical equation, the value arrived at by differentiating the equation for the first time is known as the first derivative. While it is the correct interpretation of duration, this interpretation does not help us to understand the concept of the interest rate risk of a bond. Thus, it is an operationally meaningless interpretation.
Duration is Some Measure of Time
When Macaulay introduced the measure duration he used it as a measure of time for a bond that was outstanding. He defined duration as the weighted average of the time to each coupon and principal payment of a bond. The drawbacks of this interpretation are:
The proper way to interpret a duration is as the price volatility of a zero-coupon bond with a number of years to maturity. For example, when we say that a bond has a duration of 5 years, it means that the bond has the price sensitivity to rate changes of a 5-year zero-coupon bond.
When we explain duration in terms of years, then it is very difficult to understand the duration of some complex securities.
Given that risk-averse investors demand more return for taking on more risk when they invest, how much more return is appropriate for, say, a share of common stock, than is appropr
Q. Describe Working Capital Decision? Working Capital Decision: - It is anxious with the management of current assets. It is a significant function of financial management. Cur
Will you please give the defination of "Future Value Of An Annuity"?
explain in detail the primary function of taxation in relation to public fianace
Question 1 What is liquidity risk? What are the causes for liquidity risk? Question 2 Explain the powers and functions of SEBI Question 3 Discuss the various categories
Specific Cost of Capital When the Cost of every source of capital is individually calculated, it is known as Specific Cost of Capital example Cost of equity, cost of debt, etc
What is Benchmarking "A continuous, systematic process for evaluating the products, services and work processes of an organisation that are recognised as representing best prac
3. The following information are related to Sun Ltd. Paid-up equity capital ` 10,00,000 Earnings of the company ` 1,00,000 Dividend paid ` 80,000 Price - Earning rat
discuss the applicabilty of the operating cycle in a vegetable growing business
challenges that the finance manager face in fulfilling the managerial function
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd