Exhibit 18.3 Use the Information Below for the Following Problem(S)

question 85

Multiple Choice

Exhibit 18.3
Use the Information Below for the Following Problem(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3.Calculate the Macaulay duration for the bond.

• A) 3.19 years
• B) 3.36 years
• C) 3.57 years
• D) 3.72 years
• E) 3.84 years

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Definitions:

Specialize

To focus on a specific area of production or study to gain efficiency or expertise.

Gains from Trade

The increase in welfare or economic benefit that countries or individuals obtain by engaging in voluntary exchanges where they specialize according to their comparative advantages.

Equilibrium

A state in a market where supply equals demand, leading to a stable situation where there is no tendency for prices to change, assuming other factors remain constant.

Scarcity

The fundamental economic problem of having limited resources to meet unlimited wants and needs.