Macaulay's Duration

Posted in Finance, Accounting and Economics Terms, Total Reads: 1657

Definition: Macaulay's Duration

Macaulay's duration is a measure of the effective time to maturity of a bond. This concept was given by Frederick Macaulay in 1938, it became popular after 1970s. The duration is calculated with the help of a formula:

macaulay 1

n = total cash flow
t = time to reach maturity
C = cash flow
i = expected yield
M = maturity value
P = price of the bond

Bond price equals:


So the following is an expanded version of Macaulay duration:

        macaulay 3

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