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.

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