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.

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Definitions:

Tax

A mandatory fiscal fee or different form of levy placed on a taxpayer by a government entity to finance government expenditures and a range of public spending.

Inelasticities

A measure of the sensitivity, or lack thereof, of one variable to a change in another variable, typically used in economics to describe situations where changes in price have little to no effect on supply or demand.

Tax Burden

The total amount of taxes paid by individuals or businesses relative to their income, often analyzed to assess the impact of taxation on economic behavior.

Tax

A necessary financial obligation or other form of tax exacted from a taxpayer by a state institution with the aim of covering government expenses and various public financial needs.