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

Sources of risk, Define Sources of risk with types???? how can we analys...

Define Sources of risk with types???? how can we analysis the risk in bussiness?? plese help!!!!!

Pre-requisites for effective budgetary control system, ORGANISATION FOR BUD...

ORGANISATION FOR BUDGETARY CONTROL (or) PRE-REQUISITES FOR THE INTRODUCTION OF AN EFFECTIVE BUDGETARY CONTROL SYSTEM 1.   BUDGET CENTRE:  It is a section of the organization

How to calculate annual yield for security?, Illustration  The mo...

Illustration  The monthly yield of a mortgage backed security is 0.75%. Find out the annual yield for this security. Solution Annual yield = 2 [(1 + 0

Determine the strategy of market development, Market development A stra...

Market development A strategy which seeks to sell existing products in new geographical markets or new market segments. A strategy to find new uses for existing products or ser

Cost of capital, what is the major value of the weighted cost of capital ca...

what is the major value of the weighted cost of capital calculation for the firm?

Compute the income available for equity shares, Evergreen Company Ltd has b...

Evergreen Company Ltd has been promoted by promoters. They are trying to decide how the company could be financed. There are three choices: i. Issue Rs 500,000 in Equity shares

Money and Banking, Using a spreadsheet program or a calculator, solve Tracy...

Using a spreadsheet program or a calculator, solve Tracy’s problem of how often to go to the ATM when the nominal interest rate on her bank account is 10 percent, she spends $30 ea

Credit risk, A bond investor is always exposed to credit risk. Credit...

A bond investor is always exposed to credit risk. Credit risks can be classified into three types. They are: Default Risk Credit Spread Risk

Define hedger - market participants, Define Hedger - Market Participants ...

Define Hedger - Market Participants A hedger desires to prevent price variation by locking in a purchase price of the underlying asset by a long position in a futures contract

Impact of the yield level in bonds, Different bonds trade at differen...

Different bonds trade at different yields though the coupon rate, maturity, and embedded options are same for them. Assuming that all the other bond characteristi

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