Which One of the Following Is the Reason That Macaulay

question 19

Multiple Choice

Which one of the following is the reason that Macaulay duration is NOT a good measure of interest rate risk for mortgage bonds?

• A)Mortgage bonds are long-term securities while Macaulay duration is a short-term measure.
• B)Macaulay duration assumes the debt has a variable rate and most mortgages have a fixed rate.
• C)Macaulay duration requires bond payments to be made semiannually.
• D)Macaulay duration assumes payments are fixed and mortgage bond payments vary.
• E)Macaulay duration only applies to zero coupon bonds.

---

Definitions:

Central

Pertaining to the most important or core aspects of something, often in a system or theory.

Parasympathetic

Pertains to the part of the autonomic nervous system responsible for conserving energy and slowing down the heart rate.

Sympathetic

Pertaining to the part of the autonomic nervous system that increases alertness, muscle tension, and energy expenditure in response to stress.

Somatic

Pertaining to the body, especially as distinct from the mind or the emotions.