A firm has a liability cash flow of 100 at the end of year two and a second liability cash flow of 200 at the end of year three. The firm also has asset cash flows of X at the end of years one and five. Using an annual effective interest rate of 10%, calculate the absolute value of the difference between the Macaulay durations of the asset and liability cash flows.
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A firm has a liability cash flow of 100 at the end of year two and a second liability cash flow of 200 at the end of year three. The firm also has asset cash flows of X at the end of years one and five. Using an annual effective interest rate of 10%, calculate the absolute value of the difference between the Macaulay durations of the asset and liability cash flows.
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