A 30-year fixed rate mortgage has a Macaulay duration that is A. equal to 30 years....
A 30-year fixed rate mortgage has a Macaulay duration that is
-
A. equal to 30 years.
-
B. longer than a 30-year bond.
-
C. shorter than a 30-year bond.
-
D. the same as a 30-year bond.
Homework Answers
Answer : Macaulay duration measures time taken to recover invested money by periodic interest and principal repayments. A 30-year fixed rate mortgage has a Macaulay duration that is the same as a 30-year bond. Since given that mortgage is fixed rate and bond also pays fixed coupon, therefore Correct Option is (D.) the same as a 30-year bond
Add Answer to:
A 30-year fixed rate mortgage has a Macaulay duration that
is
A. equal to 30 years....
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is...
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is hedged against interest rate risk". However, the above statement is only true if interest rates only change before fist coupon payment is received. Using the following bond to show that if interest rate increases 2% between first and second coupon payment dates, the investor is not hedged against interest rate risk even if his duration gap is zero.: A four-year 33.7% annual coupon paying...
A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%....
A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%. What is the modified duration of this bond? The modified duration of this bond is . (Round to two decimal places.)
A bond has a Macaulay duration equal to 8.5 and a yield to maturity of 6.5%....
A bond has a Macaulay duration equal to 8.5 and a yield to maturity of 6.5%. What is the modified duration of this bond? The modified duration of this bond is(Round to two decimal places.)
1. Which of the following is an example of curve duration? A. Macaulay duration. B. Modified...
1. Which of the following is an example of curve duration? A. Macaulay duration. B. Modified duration. C. Effective duration. 2. Two statements about duration are given as follows: Statement 1: "Duration measures the percentage change in bond price for a one basis point change in the yield." Statement 2: "Money duration measures the price change in bond price for a one basis point change in the yield." A. Both statements are correct. B. Exactly one of the statement is...
a bond's macaulay duration is 10 years. if the current annual interest rate is 16%, what...
a bond's macaulay duration is 10 years. if the current annual interest rate is 16%, what is the modifies duration this bond?
Ten years ago you obtained a 30-year mortgage for $400,000 with a fixed interest rate of...
Ten years ago you obtained a 30-year mortgage for $400,000 with a fixed interest rate of 3% APR compounded monthly. The mortgage is a standard fixed rate mortgage with equal monthly payments over the life of the loan. What are the monthly fixed mortgage payments on this mortgage (i.e., the minimum required monthly payments to pay down the mortgage in 30 years)? What is the remaining loan balance immediately after making the 120th monthly payment (i.e., 10 years after initially...
Sue buys a 10 year 1000 bond at par. The Macaulay duration is 8.329 years using...
Sue buys a 10 year 1000 bond at par. The Macaulay duration is 8.329 years using an annual effective interest rate of 6.8%. a. Calculate the estimated price of the bond, using the first-order modified approximation if the interest rate rises to 7%.
1. Nov, 2005 #2. Calculate the Macaulay duration of an eight-year 100 par value bond with...
1. Nov, 2005 #2. Calculate the Macaulay duration of an eight-year 100 par value bond with 10% annual coupons and an effective rate of interest equal to 8%. (A) 4 (B) 5 (C) 6 (D) 7 (E) 8
T/F Duration is a measure of interest rate sensitivity and a bond with a duration of...
T/F Duration is a measure of interest rate sensitivity and a bond with a duration of 9 should go up 9% if rates go down 1% T/F A bond that matures in 8 years has a shorter duration then a bond that matures in 5 years all else equal. T/F A bond with a 5% coupon has a shorter duration than a bond with a 4% coupon all else equal T/F U.S. Treasury notes and bonds have no credit spread...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly? Question 8 options: A) 6.04 years B) 7.15 years C) 3.33 years D) 5.90 years E) more than 30 years
A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%. What is the modified duration of this bond? The modified duration of this bond is . (Round to two decimal places.)
A bond has a Macaulay duration equal to 8.5 and a yield to maturity of 6.5%. What is the modified duration of this bond? The modified duration of this bond is(Round to two decimal places.)
Sue buys a 10 year 1000 bond at par. The Macaulay duration is 8.329 years using an annual effective interest rate of 6.8%. a. Calculate the estimated price of the bond, using the first-order modified approximation if the interest rate rises to 7%.
1. Nov, 2005 #2. Calculate the Macaulay duration of an eight-year 100 par value bond with 10% annual coupons and an effective rate of interest equal to 8%. (A) 4 (B) 5 (C) 6 (D) 7 (E) 8
Most questions answered within 3 hours.
-
When 60.1 gg of calcium is reacted with nitrogen gas, 31.7 gg of
calcium nitride is...
asked 1 minute from now -
The random variable X is exponentially distributed, where X
represents the time it takes for a...
asked 13 minutes ago -
a) Write a verilog module for 1:4 Demultiplexer using verilog
primitives.
b) Design 1-to-4 DEMUX using...
asked 8 minutes ago -
MATLAB
write a MATLAB function (1) output a third-order polynomial
function with the coefficients as the...
asked 21 minutes ago -
A z-score
communicates a raw score’s "relative standing"
under the normal curve in relation to:
asked 29 minutes ago -
An object is vibrating on a spring with the following equation
of motion:
?=(30 ??)cos((2?)/(160)?)
a)...
asked 28 minutes ago -
Vulcan Flyovers offers scenic overflights of Mount St. Helens,
the volcano in Washington State that explosively...
asked 31 minutes ago -
If organizations do not adapt fast enough and move incrementally
from the twentieth-century model to the...
asked 32 minutes ago -
A helium balloon with 2.5L of gas has a gauge pressure of 10,000
Pa. The balloon...
asked 36 minutes ago -
What is responsible for Jupiter's enormous magnetic field?
asked 51 minutes ago -
At the end of the year, a company offered to buy 5,000 units of
a product...
asked 53 minutes ago -
Implement C++ program for each of the following.
Let D = [-48, -14, -8, 0, 1,...
asked 1 hour ago