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

Negotiating and closing transaction, Negotiating and Closing Transaction: ...

Negotiating and Closing Transaction: A diverse set of skills and very thorough preparation is required for negotiating and closing a divestiture transaction. Facts and informat

Buy and hold - passive strategy, A simple passive strategy involves b...

A simple passive strategy involves building a portfolio and holding it through time. The coupons as well as the proceeds of matured bonds are just reinvested in new iss

Parity conditions, Parity Conditions A parity condition defines the rel...

Parity Conditions A parity condition defines the relative value of one country's currency to the other country's currency. The condition states how, for the example, difference

Enhance or maintain its image and reputation, a) Marketing might be vital t...

a) Marketing might be vital to an organisation such as WHSG for several reasons, including: • The need to be a focus for the right kind of students to the school (there are riva

Expalin depository institutions, Depository institutions Depository ins...

Depository institutions Depository institutions: intermediaries with a important proportion of their funds derived from customer deposits - include commercial banks - savings i

Types of warrants, Types of Warrants The warrants can be classified int...

Types of Warrants The warrants can be classified into different types. They are: Detachable Warrants These warrants are issued with most debentures, like convertible o

Explain how nontradable asset be priced, Assume there exists a nontradable ...

Assume there exists a nontradable asset with a perfect positive correlation along with a portfolio T of tradable assets. How will the nontradable asset be priced? The nontradable

Eurobonds, The term 'Eurobonds' refers to bonds issued and sold outsi...

The term 'Eurobonds' refers to bonds issued and sold outside the home country of the currency. For example, a dollar denominated bond issued in the UK is a Euro (

Which type of insurance company generally takes risks, Which type of insura...

Which type of insurance company generally takes on the greater risks: a life insurance company or a property and casualty insurance company? The risks protected against by cas

Capital budgeting model, Develop a scenario for the future growth of the fi...

Develop a scenario for the future growth of the firm e.g. through using a SWOT analysis to identify an appropriate outcome (this will be covered in lectures) • If it is to grow

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