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The Objective of Capital Structure Management Is to Maximize the Market

question 71

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The objective of capital structure management is to maximize the market value of the firm's equity.


Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, including all interest payments and the repayment of principal.

Modified Duration

Macaulay’s duration divided by 1 + yield to maturity. Measures interest rate sensitivity of bonds.

Macaulay Duration

A measure of the weighted average time until all cash flows from a bond are received, used to gauge a bond's interest rate sensitivity.

Yield To Maturity

A measurement of the annual return an investor can expect from a bond if held to its end date, factoring in its price, interest payments, and time to maturity.

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