Financial Risk Manager Part 1

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Explanation:

Compute the present value of each cash flow using continuous discounting:

Bond price:

P = 4e^{-0.06} + 4e^{-0.12} + 104e^{-0.18} \approx 94.18

Macaulay duration under continuous compounding is:

D = \frac{\sum t \cdot PV(CF_t)}{P}

D = \frac{1\cdot 3.767 + 2\cdot 3.547 + 3\cdot 86.868}{94.182} \approx 2.88\text{ years}

So the correct answer is C.

Explanation:

Compute the present value of each cash flow using continuous discounting:

Bond price:

P = 4e^{-0.06} + 4e^{-0.12} + 104e^{-0.18} \approx 94.18

Macaulay duration under continuous compounding is:

D = \frac{\sum t \cdot PV(CF_t)}{P}

D = \frac{1\cdot 3.767 + 2\cdot 3.547 + 3\cdot 86.868}{94.182} \approx 2.88\text{ years}

So the correct answer is C.

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MManit

Last updated: April 18, 2026 at 11:32

2.68 years

28.6%

2.78 years

28.6%

2.88 years

28.6%

3.00 years

14.3%