Which One of the Following Statements Is Correct Concerning Macaulay

question 99

Multiple Choice

Which one of the following statements is correct concerning Macaulay duration?

• A)The duration of a zero coupon bond is equal to the time to maturity.
• B)Most bonds have durations in excess of 15 years.
• C)The duration of a coupon bond is a linear function between the time to maturity and the duration.
• D)The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates.
• E)The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (−1 × Macaulay duration).

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Definitions:

Leverage Value

Refers to the use of financial leverage or borrowing to increase the potential return of an investment, enhancing the value for shareholders.

Free Cash Flows

The amount of cash a company generates after accounting for capital expenditures needed to maintain or expand its asset base.

Capital Structure

The capital structure is the mix of a company's long-term debt, short-term debt, common equity, and preferred equity, representing how a firm finances its overall operations and growth through various sources of funds.

Free Cash Flow to Equity

The amount of cash that could be potentially distributed to shareholders after all expenses, reinvestments, and debt repayments have been taken care of.