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A Bond Has a Macaulay Duration of 4

question 85

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A bond has a Macaulay duration of 4.5, a yield to maturity of 5.1%, a coupon rate of 6.0%, and semiannual interest payments. What is the bond's modified duration?


Definitions:

U-Shaped AVC

The U-Shaped Average Variable Cost curve represents how the per-unit production expenses initially decrease due to increasing returns and subsequently increase after reaching a certain scale due to diminishing returns.

Perfectly Competitive

A perfectly competitive market is one with many buyers and sellers, where no single entity can influence the market price, and all products are identical.

Profit-Maximizing

A strategy or approach focused on increasing a firm’s profits to the highest possible level given its production costs and market demand.

Downward-Sloping

A characteristic of demand curves where price and quantity demanded move in opposite directions.

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