The Modified Duration

question 74

Multiple Choice

The modified duration:

• A)is equal to the Macaulay duration divided by (1 + yield to maturity).
• B)multiplied by (−1 × change in the yield to maturity)equals the approximate percentage change in a bond's price.
• C)will be the same for any bonds that have equal times to maturity.
• D)only applies to pure discount securities.
• E)must be converted to a Macaulay duration before computing the percentage change in a bond's price.

---

Definitions:

Bank Credits

The aggregate amount of credit available to a borrower from the banking system.

Net Present Value

A method of evaluating the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over the investment's lifetime.

Variable Cost

Costs that vary in proportion to the volume of output or activity, such as materials and labor.

Monthly Interest Rate

The percentage of interest charged or earned on a loan or investment over a month.