What is the relationship between Macaulay duration and Modified duration for an annual coupon bond?
Explanation
Modified duration adjusts Macaulay duration by dividing by (1 + Yield) to reflect price sensitivity.
Other questions
Which of the following is NOT one of the three sources of return for a fixed-rate bond investor?
For an investor's yield-to-maturity at purchase to equal their realized rate of return, which assumption must hold?
Uncertainty about the price at which a bond can be sold prior to maturity is best described as:
If an investor has a shorter investment horizon, which risk is dominant?
Macaulay duration is best defined as:
If a bond pays coupons semiannually, how is the annualized Macaulay duration obtained?
Modified duration is primarily used to measure:
Which duration measure is most appropriate for bonds with embedded options like callable bonds?
Calculate the approximate Modified Duration if a bond price drops from 100 to 98 when the yield rises by 50 basis points, and rises to 102 when the yield falls by 50 basis points.
How does the duration of a bond typically react to an increase in maturity, holding other factors constant?
How does an increase in the coupon rate affect a bond's duration?
How does an increase in the Yield-to-Maturity (YTM) affect a bond's duration?
For a callable bond, how does duration compare to a non-callable bond when yields are low?
Money Duration is defined as:
A bond has a Modified Duration of 6 and a full price of 1050. What is the Money Duration?
The Price Value of a Basis Point (PVBP) represents the change in bond price for what magnitude of yield change?
If the Money Duration of a bond is 6300, what is the estimated change in the bond price for a 0.5 percent change in yield?
What is the Macaulay duration of a zero-coupon bond?
What is the Macaulay duration of a perpetual bond with yield r?
Which bond has a Macaulay duration equal to (T - t) / T, where T is the time between resets?
Why do floating-rate instruments generally offer low interest rate risk to investors?
If a bond's modified duration is 5.0, what is the approximate percentage change in price for a 1 percent increase in yield?
What is the key difference between Modified Duration and Effective Duration regarding cash flows?
For a Putable bond, how does duration behave when yields are high?
Optionality of a bond will generally _________ the duration compared to an option-free bond.
Which duration metric calculates the percentage change in the full price of a bond?
If a bond has a Money Duration of 5000 and the yield changes by +0.01% (1 basis point), what is the change in price?
In the formula for approximate Modified Duration, V_minus refers to:
Which risk balances coupon reinvestment gain/loss against price loss/gain for a one-time parallel shift?
Generally, the 'price risk' of a bond is higher when:
Reinvestment risk matters more when:
The difference between Macaulay duration and the investment horizon is known as the:
If the Duration Gap is positive (Macaulay Duration > Investment Horizon), the investor is primarily exposed to:
If a zero-coupon bond has 10 years to maturity and a yield of 10%, what is its Modified Duration?
For a floating-rate note with a 180-day coupon period and 57 days elapsed since the last reset, what is the approximate Macaulay duration?
What is the primary reason floating-rate instruments are useful in portfolio management?
Which bond type always has a Macaulay duration equal to its time-to-maturity?
Calculate the PVBP for a bond with a Money Duration of 450,000.
If yield volatility is high, which duration measure is most critical for a callable bond?
A bond's full price is 100. Its Modified Duration is 8. If the yield rises by 50 bps, the price is expected to:
Why is the duration of a perpetuity not infinite?
Which bond has the highest interest rate risk (duration), assuming equal yields and coupons?
Which bond has the highest interest rate risk (duration), assuming equal maturity and yield?
In the context of Money Duration, the term 'Dollar Duration' is synonymous with:
If a bond's price increases by 4 when yield falls by 1%, what is the Modified Duration approx?
What does a PVBP of 0.625 imply?
For a fixed-rate bond, reinvestment risk is strictly:
In the formula used for calculating Modified Duration from prices (V-, V+, V0), the divisor includes '2 * V0 * Delta_Yield'. Why is the factor '2' included?
Which bond property leads to 'negative convexity' behavior where duration falls as yields fall?