Macaulay duration and modified duration, Financial Management

We can also express Modified duration as follows:

          537_modified duration.png                                                                                    ...Eq. (3)

The expression in the brackets of the modified duration formula is given by equation (3) and is a measure created by Frederick Macaulay in 1938. This measure is known as Macaulay duration. Actually Macaulay duration is nothing but the weighted-average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing the present value of the cash flow by the price. Rewriting the formula of modified duration, we get:

         1438_modified duration1.png

Posted Date: 9/10/2012 5:17:03 AM | Location : United States







Related Discussions:- Macaulay duration and modified duration, Assignment Help, Ask Question on Macaulay duration and modified duration, Get Answer, Expert's Help, Macaulay duration and modified duration Discussions

Write discussion on Macaulay duration and modified duration
Your posts are moderated
Related Questions
I am trying to make a payment and I can''t seem to get it to go throught on you all site..

State about Investment decision Decisions relating to investment in both current and capital assets. Finance manager has to evaluate different capital investment proposalsan

QUESTION (a) List the five elements of the purchasing mix. (b) Describe briefly the four essential elements of a legally binding contract. (c) Distinguish between perform

The purpose of this financial analysis is to determine the economic viability during the last five years of the Lance Company and to advise our client on whether the acquisition of

In a fixed-rate coupon bond, the change in the price can be attributed to the change in the market interest rates. This change is due to the difference in the pre

These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For

Q. Show Gross Vs net working capital? The distinction between the gross working capital or the net working capital does not in any way undermine the relevance of the concepts o

Consumer Advisory Panel (CAP) of ASIC It was established in 1998. Its role is to advise ASIC on current consumer protection issues and give feedback on ASIC policies and activi

Joe and Sam each invested $20,000 in the stock market. Joe's investment increased in value by 5% per year for 10 years. Sam's investment decreased in value by 5% for 5 years and th

Prices of Calls and Puts Options the shares of Marks & Spencer a) Explain carefully why the November calls are trading at higher prices than the September calls. b) Draw