Which of the Following Is the Correct Algebraic Expression of Modified

question 7

Multiple Choice

Which of the following is the correct algebraic expression of modified duration? (PV01 is based on interest rate(r) that are compounded m times a year instead of continuously)

• A)Modified duration=[DUR/(1+ r/m)] \(\times\) 0.0001 \(\times\) P
• B)Modified duration=[DUR/(1- r/m)] \(\times\) 0.0001 \(\times\) P
• C)Modified duration= DUR/(1+ r/m)
• D)Modified duration= DUR/(1- r/m)

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Definitions:

Balance Sheet

A financial statement summarizing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Financial Statements

Comprehensive reports created to present a business's financial performance and position, typically including the balance sheet, income statement, and cash flow statement.

Note Receivable

A formal agreement in which one party promises to pay another a specific sum of money, typically with interest, by a certain date.

Uncollectible Accounts

Accounts receivable that a business does not expect to collect due to customers' inability or unwillingness to pay, often leading to a write-off.