Final answer:
If the investment horizon is different than the Macaulay duration, the investor may earn more or less than the yield to maturity (YTM). If the investment horizon is shorter than the Macaulay duration, the investor will likely earn less than the YTM. On the other hand, if the investment horizon is longer than the Macaulay duration, the investor may earn more than the YTM.
Step-by-step explanation:
If the investment horizon is different than the Macaulay duration, the investor may earn more or less than the yield to maturity (YTM).
If the investment horizon is shorter than the Macaulay duration, the investor will likely earn less than the YTM. This is because the YTM assumes that all coupon payments are reinvested at the YTM rate for the same duration as the bond.
On the other hand, if the investment horizon is longer than the Macaulay duration, the investor may earn more than the YTM. This is because the bond's price and yield move in opposite directions. As time passes, the price of the bond may increase or decrease, resulting in a capital gain or loss for the investor.