# Fight Finance

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Which of the following statements about Macaulay duration is NOT correct? The Macaulay duration:

A fixed coupon bond’s modified duration is 20 years, and yields are currently 10% pa compounded annually. Which of the following statements about the bond is NOT correct?

Which of the following statements about Macaulay duration is NOT correct? The Macaulay duration:

A fixed coupon bond’s modified duration is 10 years, and yields are currently 5% pa compounded annually. Which of the following statements about the bond is NOT correct?

Which of the following statements about bond convexity is NOT correct?

Find the Macaulay duration of a 2 year 5% pa annual fixed coupon bond which has a $100 face value and currently has a yield to maturity of 8% pa. The Macaulay duration is: Find the Macaulay duration of a 2 year 5% pa semi-annual fixed coupon bond which has a$100 face value and currently has a yield to maturity of 8% pa. The Macaulay duration is:

Assume that the market portfolio has a duration of 15 years and an individual stock has a duration of 20 years.

What can you say about the stock's beta with respect to the market portfolio? The stock's beta is likely to be:

Which of the following assets would have the shortest duration?

A stock has a beta of 0.5. Its next dividend is expected to be \$3, paid one year from now. Dividends are expected to be paid annually and grow by 2% pa forever. Treasury bonds yield 5% pa and the market portfolio's expected return is 10% pa. All returns are effective annual rates.

What is the Macaulay duration of the stock now?

An unlevered firm cuts its dividends and re-invests in zero-NPV projects with the same risk as its existing projects. This decreases the dividend yield, but increases the firm's equity's dividend growth rate and duration, while its total required return on equity remains unchanged. The equity can be valued as a perpetuity and the duration of a perpetuity is given below:

$$D_\text{Macaulay} = \dfrac{1+r}{r-g}$$

What will be the effect on the stock's CAPM beta? Assume that there's no change in the risk free rate or market risk premium. The company's equity beta will: