Fight Finance

(a) Is the weighted average time that an asset’s cash flows are received, usually measured in years.

(b) Divided by (1+y) equals the modified duration, where y is the yield to maturity given as an effective annual rate and duration is measured in years.

(c) Of a zero-coupon bond is equal to the bond’s maturity.

(d) Of a fixed-coupon-paying bond will be less than the bond’s maturity.

(e) Of a portfolio is an arithmetic average of the Macaulay durations of the assets in the portfolio, weighted by their face values.

(a) The Macaulay duration of the bond is 22 years.

(b) If yields-to-maturity suddenly fell by 1 percentage point then bond prices would suddenly rise by 20% or more.

(c) If yields-to-maturity suddenly rose by 2 percentage points then bond prices would suddenly fall by 40% or less.

(d) If the bond is a zero-coupon bond then its maturity is 20 years.

(e) The modified-duration-price-change formula assumes parallel shifts in the yield curve.

(a) The Macaulay duration of the bond is 10.5 years.

(b) If yields-to-maturity suddenly rose by 1 percentage point then bond prices would suddenly fall by 10% or less.

(c) If yields-to-maturity suddenly fell by 2 percentage points then bond prices would suddenly rise by 20% or less.

(d) If the bond is a zero-coupon bond then its maturity is 10.5 years.

(e) The duration-price-change formula assumes parallel shifts in the yield curve.