Comments

  1. avatar says

    Hi sir.This one is regarding MACAULAY DURATION . in bpp text it says when yield decreases duration increases but in an example i did(opentuition notes.ch8.Example4) lowering the yield has now effect on the duration.Why is that ?

  2. avatar says

    hi , I know this is a noob question at this level but why in example 10 when i use 10% and 15% to calculate IRR i get the different value in comparison to what you have used in the question. I recall this has something to do with using one possitive npv and one negative for IRR calculation.But please would u be kind enough to elaborate.Thanks

    • Profile photo of John Moffat says

      You can use any two guesses to calculate the IRR, but because the relationship is not linear then different guesses will give slightly different answers.
      This is not a problem in the exam – you get full marks.

      Ideally we would have one positive NPV and one negative, but even that is not essential .

  3. avatar says

    In example 10 the an annuity for 6% was incorrectly used that is 4.917. It should be at 5% for 6yrs at 5.076 as the disc rate for 5% in 6 yrs was used. This is where IRR was being calculated for cost of Debt to the company. I know the concept remains the same and was just an error but for future reference i thought i should just mentioned it… the IRR was actually 7.5% not much of a difference any ways

    • Profile photo of John Moffat says

      Thanks – I will check the lecture tonight (and the answer at the back of the course notes) and if it is wrong, then I will have it corrected. (I cannot check at the moment because I am away from home).

      I do apologise if I have made a mistake.

      • avatar says

        Your welcome… But mistakes happen sometimes. I only mentioned it so for future reference. However, when i looked at the last lecture on Cost of capital, that is the lecture on EXAMPLE 10 only. The correct rate was used there. But i must say your lecture help me understand the Cost of Capital so well. Thanks a mil. You are doing a great Job. Thanks again.

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