Consider two annuities that both make annual payments and have the same yield. The first annuity is
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Question:
Consider two annuities that both make annual payments and have the same yield. The first annuity is a level 3-year annuity-due and its Macaulay duration is 0.94. The second annuity is a level 4-year annuity-due.
(a) Will the Macaulay duration for the second annuity be larger or smaller than 0.94? Explain.
(b) Calculate the Macaulay duration for the second annuity.
Related Book For
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander
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