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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Macaulay Duration
In the 2017 Conejo December answer it says
“Duration indicates the time it takes to recover half the repayments of interest and capital of a bond, in present value terms. ”
but if you calculate from any example it does not actually give you the time to recover half of the payments.
example from the first macaulay duaration we find in the answer:
Macaulay duration based on annual coupon of $3·57 and redemption value of $100 in year =4.7 YEARS
half of repayments of interest and capital in PV =50$ (since MV is 100)
year 1 = 3.49
2 = 3.32
3 = 3.21
.7=86.89 * .7=60.82
this gives us a total of 70.84. Far MORE THAN the “half the repayments of interest and capital in PV”
Am i doing something wrong? Why arent I getting the half value of the bond ?
It isn’t exactly half, and I don’t know why they have that statement 🙂