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Question 103/145
Which one of the following statements describes Macauley's duration?
Correct Answer: B
Macaulay's duration is a measure of the weighted average time until a bond's cash flows are received. It calculates the time it takes for the price of a bond to be repaid by its internal cash flows. This measure is essential because it helps investors understand the interest rate risk of a bond. The longer the duration, the more sensitive the bond's price is to changes in interest rates. Therefore, Macaulay's duration is crucial for managing interest rate risk and is commonly used in bond portfolio management.
- Question List (145q)
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