Do we need to know this for real?
the L in LOS stands for learning.
@Gooner: Are you studying only from the CFAI books? All you need to know at Level I ( I think ) is Macaulay duration is a measure of interest rate risk that cannot be used to measure interest rate risk for bonds with embedded options.
@beatthecfa thanks, I was going through some supplemental information and did not check to see if it was a necessary information. Also, thanks for answering not just my questions, but other people’s–you are doing a great service to us which we appreciate!
@beatthecfa thanks, I was going through some supplemental information and did not check to see if it was a necessary information. Also, thanks for answering not just my questions, but other people’s–you are doing a great service for us which we appreciate!
I believe the CFA curriculum wants you to know that Effective Duration is a better measure - particularly for changes in expected cash flows associated with interest rate movements. That said, Macaulay is related to modified duration and is not as good a measure of price volatility / interest rate risk… AND hopefully that’s all we need to know! Basically what was said above!