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Basic Question 7 of 24
The Macaulay duration is ______ the modified duration in estimating duration for bonds with embedded options ______.
B. superior to; it does consider changing cash flows
C. equal to; because they both consider changing cash flows
D. equal to; because neither consider changing cash flows
A. weaker than; it does not consider changing cash flows
B. superior to; it does consider changing cash flows
C. equal to; because they both consider changing cash flows
D. equal to; because neither consider changing cash flows
User Contributed Comments 7
| User | Comment |
|---|---|
| harpalani | Why D? |
| johntan1979 | Why this why that... read the notes, dude. |
| enetis | burn |
| dojoe | rude |
| dbedford | D because Macaulay and Modified operate around a fixed idea of CF. |
| sshetty2 | see effective duration |
| thevinu | Effective duration is for bonds with embedded options, Macaulay and Modified are for option-free bonds. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain why effective duration and effective convexity are the most appropriate measures of interest rate risk for bonds with embedded options
calculate the percentage price change of a bond for a specified change in benchmark yield, given the bond's effective duration and convexity
CFA® 2025 Level I Curriculum, Volume 4, Module 13.