Homework Answers
| Correct option is: b. 2.70 | ||||
| Workings: | ||||
| Year | Cash Inflow | Present Value of Cash flow @ 20% | Present Value | Bonds Duration (Macaulay Duration) |
| (i) | (ii) | (iii) | (iv) = (ii)*(iii) | (iv)*(i)/$789.6 |
| 1 | $ 100 | 0.833 | $ 83.3 | 0.11 |
| 2 | $ 100 | 0.694 | $ 69.4 | 0.18 |
| 3 | $ 1,100 | 0.579 | $ 636.9 | 2.42 |
| Total | $ 789.6 | 2.70 | ||
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