Which of the following bonds is best hedged against small changes in its own yield when held to a horizon equal to its Macaulay duration?
Explanation
Macaulay duration equals the horizon where price and reinvestment risks offset for small parallel shifts when coupons are reinvested at yield.
Other questions
Which measure is the present-value-weighted average time to receipt of a bond's cash flows?
How is modified duration (annualized) obtained from Macaulay duration and yield?
A bond has annualized modified duration 5.0 and price 95 per 100 par. What is its money duration per 100 par value?
Which formula approximates annual modified duration using small symmetric yield changes and three full prices PV0, PV_plus, PV_minus?
For the same DeltaYield, adding convexity to a duration-based price estimate does what for a bond being repriced after a yield decrease?
A 5-year bond is priced at par 100, AnnModDur = 4.587, and AnnConvexity = 24.239. If yield increases by 80 basis points, what is the approximate percent price change using duration and convexity?
Which bond feature, holding other factors constant, leads to a higher modified duration?
A zero-coupon bond maturing in five years yields 3 percent. What is its modified duration (annualized)?
Which Excel function returns Macaulay duration for a bond given settlement and maturity dates, coupon, and yield?
How is PVBP (price value per basis point) approximated from PV_plus and PV_minus computed for 1 basis point shifts?
A bond has PV0 = 100.50, PV+ for +1 bp = 100.4594, PV- for -1 bp = 100.5485. What is PVBP per 100 par?
Which statement about floating-rate note (FRN) duration is correct?
If a bond's annualized modified duration is 4.0, what is the estimated percent price change when yield rises by 100 basis points using duration only?
Which bond will have the highest modified duration, all else equal?
Using approximation, which of the following is a correct expression for approximate annual convexity given PV_plus and PV_minus around PV0 with small DeltaYield?
A bond has modified duration 6 and reported convexity 0.235 (as shown). To apply percent change formula for a 1 percent yield change, how should convexity be scaled in the calculation?
For a bond with PV0 = 100, AnnModDur = 4.5, and MoneyDur = 450 per 100 par, what is the approximate PVBP in currency per 100 par?
If a semiannual-coupon bond has Macaulay duration expressed in semiannual periods of 9.3203, how do you convert to an annualized Macaulay duration in years?
Why does modified duration typically decline as a bond approaches its next coupon payment date between coupons?
Which bond characteristic can cause modified duration to increase, holding maturity constant?
For a bond traded at par with annual coupon c equal to yield r, Macaulay duration is:
Which bond will have the lowest PVBP per 100 par, all else equal?
You approximate modified duration for a bond using DeltaYield = 5 basis points. Which change to DeltaYield would generally improve the accuracy of the duration approximation (all else equal)?
If a bond's annualized modified duration is 4.58676 and its price per 100 par is 100.504, what is the approximate dollar loss on a 100 million par position if yield increases by 100 basis points using money duration (ignore convexity)?
Which bond does modified duration measure sensitivity to?
You compute approximate modified duration using PV_plus and PV_minus with DeltaYield = 5 basis points. PV_plus = 99.771, PV_minus = 100.230, PV0 = 100. What is the approximate annualized modified duration?
Which of the following is true about modified duration and effective duration for an option-free bond when the yield curve is flat?
A bond with reported annual convexity of 24 has AnnModDur 4.5 and PVFull 100. What is the money convexity for a 100 par position?
Which situation would make approximate modified duration and convexity formulas less accurate?
How do you annualize modified duration computed on a semiannual basis (two periods per year) when MDURATION returns a periodic measure?
A bond's PV_plus with yield increased by 5 bps is 99.771, PV_minus for decreased by 5 bps is 100.230 and PV0 is par 100. If you use DeltaYield = 0.0005, what is approximate annual convexity using the formula given?
If a bond trades at a full price of 100.815 per 100 par and AnnModDur is 4.335, what is the money duration per 100 par?
Which bond type typically has Macaulay duration equal to its time-to-maturity?
Which of the following is a correct practical use of PVBP for portfolio management?
What happens to a bond's Macaulay duration as it moves toward maturity, assuming yield constant?
A semiannual bond has Macaulay duration at issuance of 9.3203 periods and yield per period of 1.6 percent. What is the bond's modified duration (period basis)?
Which statement is correct about PVBP and convexity for small yield changes?
Which bond characteristic reduces its modified duration, holding maturity constant?
You approximate Macaulay duration between coupon dates by setting the first cash flow time-to-receipt to 1 - t/T where t/T is fraction elapsed. If t/T = 57/360, what is first time-to-receipt in periods?
Which of the following correctly describes the relationship between coupon rate and convexity, holding yield and maturity constant?
What is the main limitation of using modified duration alone to estimate bond price changes?
When computing approximate modified duration, why do we use symmetric yield up and down moves (PV_plus and PV_minus)?
Which of the following best explains why long-term discount bonds might have lower duration than shorter-term discount bonds at some maturities?
Which of the following practical approximations yields annualized Macaulay duration from approximate annual modified duration?
If a bond's approximate annualized modified duration is 16.249 and PVFull is 107.429, what is the PVBP (price change for 1 bp) approximately in currency units per 100 par?
A 10-year bond priced at 100 has AnnModDur 9.23693 and AnnConvexity 93.87376. For a 100 basis point increase in yield, approximate percent price change using both terms?
Which measure should you use if you need the change in price for a bond with embedded options when the benchmark par curve shifts?
A perpetuity pays coupon c forever and yields r. What is its Macaulay duration?
Which of the following best summarizes why convexity is valuable to investors?