Macaulay duration and modified duration, Financial Management

Assignment Help:

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


Related Discussions:- Macaulay duration and modified duration

Explain concept of returns, Meaning of Returns The return from holding a...

Meaning of Returns The return from holding an investment over some period - say, a year, is simply any cash payments received due to ownership, plus the change in market price,

Pros and cons of simulation technique, Pros and Cons Simulation techniq...

Pros and Cons Simulation technique allows experimentation with a model of the real life system. Whenever experimenting with the system itself is risky and/or costly, simulation

CAPM, Techiniques of capm Effects of capm

Techiniques of capm Effects of capm

Difference between transaction and translation risk, Question: You have...

Question: You have been appointed as the head of the treasury of Platza International, an automobile firm with many subsidiaries abroad. The management of Platza International

Certified management accountant, Q. Certified Management Accountant? Ce...

Q. Certified Management Accountant? Certified Management Accountant (CMA) - An accreditation conversed by the Institute of Management Accountants which indicates the designee h

Explain the dividends and interest payments, Dividends and interest payment...

Dividends and interest payments Payment  of  dividends  and  interest  can  either  be  demonstrated under financing activities or  under operating activities. Sum of the 3

Features of treasury bills, Features of Treasury Bills Treasury Bills a...

Features of Treasury Bills Treasury Bills are short-term, rupee denominations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. T-bills are issued

Drawbacks or criticism of mm approach, Q. Drawbacks or Criticism of MM Appr...

Q. Drawbacks or Criticism of MM Approach? Risk Perceptions of personal as well as corporate leverages are different: - It is incorrect to presume that 'personal leverage' is a

Merits of net present value method, Q. Merits of net present value method? ...

Q. Merits of net present value method? Merits of NPV method:- (i) Time value of funds is taken into consideration: - For the reason that this method takes into account the t

Determine the financial structure of business risk, Determine the Financial...

Determine the Financial structure of business risk Financial structure shifts toward suppliers of funds recognize a more highly levered position increased financial risk associ

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd