medium · Certified Financial Planner General Principles
Davenport is considering the purchase of zero-coupon bonds to immunize a future liability.
Which statement correctly describes the Macaulay Duration of a zero-coupon bond?
- It is calculated by dividing the coupon rate by the current yield to maturity.
- It is always less than the bond's term to maturity.
- It provides a linear price estimate that understates the actual price gain when interest rates fall.
- It is exactly equal to the bond's term to maturity.
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