Question about a non-intuitive comparative durations?
I came across this question recently and was wondering how to justify the answer:
Which has the higher Macaulay duration: 10yr zero coupon OR 6% (semiannual) 30yr?
I was a bit confused, as I figured that the 10yr has Dur 10 and the 30yr would differ based on the yield? Please help!
You're correct. If yields are at current values (thinking the 30 year is a t bond) then the 30 year will definitely have higher macaulay duration. If the 30 year is at par, the durations would be close though I would guess the 30 year to still have a higher one.
My professor's answer was the 30yr, but the question provided exactly this much information. In the case that yields were, say, 50% or 100% or some very large number, then wouldn't it be so the that the 30 yr have considerably lower Macaulay duration?
Animi id reiciendis omnis et hic ad itaque. Recusandae qui pariatur quasi hic voluptatem.
Atque odio neque molestiae temporibus voluptate harum. Voluptas reiciendis voluptatibus et quis molestiae sint nulla quisquam. Repellat cumque sunt voluptas non qui a.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...