Macaulay's Duration

question 17

Multiple Choice

Macaulay's duration:

• A) is a weighted average of the time until cash flows are received.
• B) is always greater than maturity.
• C) is never equal to maturity.
• D) directly indicates how much the price of a security will change given a change in interest rates.
• E) estimates when embedded options will be used.

---

Definitions:

Expansionary Monetary Policy

A central bank policy aimed at increasing the money supply to stimulate economic activity.

Real Interest Rates

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Nominal Interest Rates

The interest rate before adjustments for inflation, representing the face value of borrowing costs.