The duration which is divided by the interest rate plus one is classified as ____________?
Correct answer: C. modified duration
- A. decreased duration
- B. increase duration
- C. modified duration
- D. at par durationAccounting & Auditing
Explanation
Modified duration is calculated by dividing Macaulay duration by one plus the yield to maturity, or Duration ÷ (1 + interest rate). It measures a bond’s approximate percentage price sensitivity to interest-rate changes.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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