The Modified Duration

question 83

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:

Market Price

The current price at which an asset or service can be bought or sold in a competitive market.

Profit

The profit earned when the total income surpasses all the expenditures, costs, and taxes necessary for maintaining the business.

Profit-Maximizing

A strategy or approach taken by firms to achieve the highest possible profit from their operations.

Market Price

The existing rate at which an item or service is offered for buying or selling on the market.