Macaulay duration and modified duration, Financial Management

Assignment Help:

We can also express Modified duration as follows:

          537_modified duration.png                                                                                    ...Eq. (3)

The expression in the brackets of the modified duration formula is given by equation (3) and is a measure created by Frederick Macaulay in 1938. This measure is known as Macaulay duration. Actually Macaulay duration is nothing but the weighted-average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing the present value of the cash flow by the price. Rewriting the formula of modified duration, we get:

         1438_modified duration1.png


Related Discussions:- Macaulay duration and modified duration

The safety margin, Norfolk Ltd is specialized in producing & selling air co...

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:

Problems in assigning weights, Q. Problems in assigning weights? Proble...

Q. Problems in assigning weights? Problems in assigning weights: for determining the weighted average costs of capital, weight has to assign to the specific cost of the individ

Factors considered in assigning a credit rating, Credit rating agenci...

Credit rating agencies carry out credit rating. Companies appoint these agencies to assign credit rating for their corporate issues. The rating agencies may condu

Convertible bonds, Basics of Convertible Bonds The provision of convers...

Basics of Convertible Bonds The provision of conversion in a corporate bond entitles the bondholder the right to convert the bond into a predetermined number of shares of commo

Financial accounting, Financial accounting: Financial accounting attemp...

Financial accounting: Financial accounting attempts to establish the value of a particular organisation at a specific point in time, and its earnings over a specified period of

Serene Hall ?? Assignment, The purchase price is expected to be in the regi...

The purchase price is expected to be in the region of £30m - £40m now (year 0 ?? 2003) and further cash flow effects might include: ?? Annual cash inflows from New You ?? in a rang

Agency problem, Discuss how a business might limit agency problem between m...

Discuss how a business might limit agency problem between management and creditors

Calculate the total present value of the tax shield, Nortel is considering ...

Nortel is considering the purchase of a new  call routing system.  The system will cost $50M to purchase, an additional $7M to install, and will last for 30 years.  The CCA rate as

Computation of the cost of capital, Q. Computation of the cost of capital? ...

Q. Computation of the cost of capital? Computation of overall cost of capital of the firm invoices Cost of debts: debt may be issued at par , at premium or discount it may

State about the equity owners, State about the equity owners Flip side...

State about the equity owners Flip side of the coin is that the equity owners are also owners of all the profits which remain after all the debt holders are paid their interes

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd