A Bond's Macaulay Duration Is 7

question 32

Multiple Choice

A bond's Macaulay duration is 7.95 years. If the current annual interest rate is 7%, what is the modified duration of this bond?

• A) 7.00 years
• B) 7.88 years
• C) 7.43 years
• D) 7.95 years
• E) 8.51 years

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Definitions:

Average Operating Assets

The average value of assets utilized in the regular operations of a business to generate earnings, calculated over a certain period.

Minimum Required Rate Of Return

The lowest acceptable return on an investment, determined by the investor’s preferences, risks, and opportunity costs.

Net Operating Income

A company's total earnings from its operations, exclusive of taxation and interest.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of the shareholders.