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

Essentials of rating service, Critical investment decisions may be ta...

Critical investment decisions may be taken based on the ratings offered by the credit rating agency. In order to ensure that the rating leads to good investment d

WACC, Keys Printing plans to issue a $1,000 par value, 10-year noncallable ...

Keys Printing plans to issue a $1,000 par value, 10-year noncallable bond with a 5.00% coupon, paid semiannually. It should sell at par. The company''''s marginal tax rate is 40.00

Dividend policy, DIVIDEND POLICY Dividends provide the portion of a fi...

DIVIDEND POLICY Dividends provide the portion of a firm's net earnings which are paid out to the shareholders. the objective of financial management of maximizing the share

Major risk return decision areas, Q. Major Risk Return Decision Areas? ...

Q. Major Risk Return Decision Areas? 1) Financial Analysis and Control: This area is concerned with the Financial Statements, i.e. Income Statement, Balance Sheet, Funds Flow S

Market versus capital market, For what kinds of needs do you think a firm w...

For what kinds of needs do you think a firm would issue securities in the money market versus the capital market?

What is the meaning of financing decision, What is the meaning of Financing...

What is the meaning of Financing decision Financing decision of a firm relates to choice of the proportion of these sources to finance investment requirements.

How to develop career strategy, Q. How to develop career strategy? in t...

Q. How to develop career strategy? in this step employees need to focus on developing the knowledge experience and skills necessary to market self to prospective organizations.

No title, discuss the steps in the controlling process

discuss the steps in the controlling process

Compare and contrast a forward contract and an option, QUESTION (a) Bri...

QUESTION (a) Briefly define foreign exchange rate risk and the three different types of exchange rate risks (b) Identify and outline the different methods of internal and ex

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