Calculate the Modified Duration for a 10-Year, 12 Percent Bond

question 109

Multiple Choice

Calculate the modified duration for a 10-year, 12 percent bond with a yield to maturity of 10 percent and a Macaulay duration of 7.2 years.

• A) 6.43 years
• B) 6.55 years
• C) 6.79 years
• D) 6.86 years
• E) 7.01 years

Understand the implications of residuals analysis on the applicability of linear models.

Critically evaluate the use of statistical data in supporting conclusions.

Understand and apply regression analysis in predicting outcomes based on given data.

Interpret regression analysis results, including coefficients and R-squared values.

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Definitions:

Double Diminishing-Balance

An accelerated method of depreciation that calculates expense by doubling the straight-line depreciation rate applied to the declining book value of an asset.

Depreciation Expense

The allocated reduction in the value of a tangible asset over its useful life, recognized as an expense on the income statement.

Residual Value

The projected value that an asset is anticipated to yield when it is disposed of after its lifespan has concluded.

Depreciation Method

A systematic approach used to allocate the cost of an asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.