Differentiate between Macaulay duration and modified duration.

• A. Macaulay duration is weighted average time to cash flows; Modified duration adjusts Macaulay for yield and estimates percentage price change for small yield shifts.
• B. Macaulay duration measures percentage price change; Modified duration measures time to cash flows.
• C. Macaulay duration equals maturity.
• D. Macaulay duration is the yield; Modified duration is the risk.

Answer: (A)