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# Question of the Week - Fixed Income

Des Moines, IA, USAPosts: 211 Sr Associate
edited December 2015
Ron Wong has a portfolio with two zero-coupon bonds. One pays \$100 at time 1. The other pays \$500 at time 2. The market value of Ron's portfolio is \$504.13. The Macaulay duration of Ron's portfolio is closest to:

## Question of the Week - Fixed Income 13 votes

1.7
15%
1.8
76%
1.9
7%
1 vote

• MelbournePosts: 80 Sr Associate
1.8
It's just the time weighted yield to maturity for each of the zero coupon bonds right?
• delhiPosts: 1 Associate
1.8
mn wuhq hwepew ewur uewero we ewwe
• Des Moines, IA, USAPosts: 211 Sr Associate
1.8
First, we must calculate the cash flow yield. This statistic is calculated just like the IRR:
504.13 = 100 / (1 + r) + 500 / (1 + r)^2
r = 10%

The Macaulay duration is the weighted average of time to receipt of each payment, discounted at the cash flow yield:
MacDur = [1(100) / 1.1 + 2(500) / 1.1^2] / (100 / 1.1 + 500 / 1.1^2) = 1.82