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

Deficiency in design, Deficiency in Design - This exists when a control ess...

Deficiency in Design - This exists when a control essential to meet the control objective is missing or an existing control isn't properly designed so that even if control operates

Financial mangement enviroment, 1. role financial intermediaries 2. nature ...

1. role financial intermediaries 2. nature and role of money markets

Leverage, evaluate the importance of leverage in a small scale companyestio...

evaluate the importance of leverage in a small scale companyestion..

What do you mean by letter of credit, Q. What do you mean by Letter of Cred...

Q. What do you mean by Letter of Credit? A letter of credit is an arrangement whereby a bank helps its customer to obtain credit from its (customer's) suppliers. When a bank op

Define inventory is sometimes thought of as a necessary evil, Inventory is ...

Inventory is sometimes thought of as a necessary evil.  Explain. Inventory ties up funds and these types of funds are not earning an explicit return.  A few inventory is often es

State the economic conditions of cost of capital, State the economic condit...

State the economic conditions of cost of capital General economic conditions These include demand for and supply of capital within the economy and level of expected inflatio

Calculate the expected return and risk, QUESTION The Stock of Max Ltd ...

QUESTION The Stock of Max Ltd performs relatively well compared to other stocks during recessionary periods. The stock of Bax Ltd, on the other hand, does well during growth p

Assignment, Imagine you have been allocated $100,000 which is to be investe...

Imagine you have been allocated $100,000 which is to be invested in 8 companies listed on the Australian Stock Exchange (ASX). You are required to have a balanced portfolio betwee

Coupon curve duration, Market price is used for determining the dura...

Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-bac

MIS, evaluation and maintenance of MIS

evaluation and maintenance of MIS

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