Which One of the Following Statements Correctly Describes the Weights

question 17

Multiple Choice

Which one of the following statements correctly describes the weights used in the Macaulay duration calculation?
The weight in Year t is equal to ________.

• A)the dollar amount of the investment received in Year t
• B)the percentage of the future value of the investment received in Year t
• C)the present value of the dollar amount of the investment received in Year t
• D)the percentage of the total present value of the investment received in Year t

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Definitions:

Interest Payments

Payments made to lenders or bondholders as compensation for the use of borrowed money or invested capital.

Trust Company

A financial institution that acts as a trustee, managing estates, setting up trusts, and handling assets for beneficiaries.

Indenture

A formal agreement, or contract, between a bond issuer and the bondholders, specifying the terms of the bond.

Sinking Fund

A fund established by an entity by setting aside revenue over time for the purpose of paying off debt or replacing a future expense.