Learning outcomes

After this module you can:

1. Price a fixed-coupon bond, solve for its yield to maturity, and prove the yield is unique.
2. Derive Macaulay duration, modified duration and convexity. Use the second-order approximation to estimate a price change, and bound its error.
3. Derive the duration of a Gordon-growth equity, $1/(r-g)$. Use it to explain why growth stocks, long bonds and gold fall when real yields rise.
4. Decompose a nominal yield into real yield and breakeven inflation. Explain what a yield-curve inversion does and does not tell you.
5. Compute Taylor-rule prescriptions for the Fed and the RBI from dated inputs, and state the Taylor principle with a stability proof.
6. Derive covered interest parity as a no-arbitrage result, including bid–ask bands. Detect an arbitrage, and explain the Fama regression and why uncovered parity fails.
7. Explain the drivers of USDINR: oil, the current account, portfolio flows, RBI intervention and reserves. Trace a Fed or oil shock through to the Nifty.
8. Place a macro environment in Dalio's growth–inflation quadrants, and say where that mapping has failed (2022, March 2026).