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

Federal reserve board, Federal Reserve Board The Federal Reserve Board ...

Federal Reserve Board The Federal Reserve Board controls the nation's monetary policy, regulates banks, and searches to keep the financial stability of the United States. Its t

Break even sales, given just the sales and profit values, how is the break-...

given just the sales and profit values, how is the break-even sales calculated?

Name a useful matrix for acquisitions is ansoff matrix, A useful matrix for...

A useful matrix for acquisitions is Ansoff Matrix (business strategy knowledge) Ansoff product/market growth strategies model is a framework for the creation of strategic optio

Explain benefits of currency option contract as hedging tool, What are the ...

What are the advantages or benefits of a currency options contract as a hedging tool compared with the forward contract? Answer:  The major advantage of by using options contra

Incremental policy model to the policy making process, Question 1: Poli...

Question 1: Policy implementation is the most critical stage of the policy process. Critically analyse some of the main constraints that hinder the implementation of public pol

Determine the cost, a) Social marketing is the use of normal marketing meth...

a) Social marketing is the use of normal marketing methods to achieve the benefits of social change, such as informing the public about the harm of under-age drinking, rather than

Describe the general pattern of cash flows, Describe the general pattern of...

Describe the general pattern of cash flows from a bond with a positive coupon rate. Cash flows from a bond along with a positive coupon rate contain periodic interest payments an

Meaning of working capital, Problem 1 What are the characteristics of s...

Problem 1 What are the characteristics of small business? Describe the various forms of organisation under which small business operate. Characteristics List the vari

Convertible bonds, Convertible bonds are the debt instruments issued which ...

Convertible bonds are the debt instruments issued which can be converted after a pre-specified date for a pre-specified number of securities (generally equity stock). I

What is the benefits of divestment, What is the Benefits of divestment ...

What is the Benefits of divestment ¸ Releases cash tied up to finance more promising opportunities. ¸ Reduces diversification and complexity of a group in case of a demerger

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