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    Question

    ________ of a bond is a measure of the time taken to

    recover the initial investment in present value terms.
    A Yield to Maturity (YTM) Correct Answer Incorrect Answer
    B Convexity Correct Answer Incorrect Answer
    C Macaulay Duration Correct Answer Incorrect Answer
    D Maturity Period Correct Answer Incorrect Answer
    E Modified Duration Correct Answer Incorrect Answer

    Solution

    Macaulay Duration is the weighted average time (in years) an investor must hold a bond to receive its full value through cash flows (coupons and principal), representing the economic "balance point" where present values of payments equal the bond's price, and it's a key measure of a bond's interest rate sensitivity, with longer durations indicating greater price volatility.

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