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McCauley Duration

This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.

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October 18, 2018 at 3:35 am #479019
richardscully
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Dear Sir
What is the point if the cost of the investment is not taken into account, what are you paying back????
October 18, 2018 at 8:37 am #479063
John Moffat
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It is taken in to account – the market value is the PV of the future cash flows, as always.
October 18, 2018 at 10:00 am #479081
richardscully
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Of course, but my point is that those future cash flows could be less than the cost of the investment. At least with NPV you deduct the investment, with McCauley you ignore the negative costs
October 19, 2018 at 7:23 am #479167
John Moffat
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But the PV of the future cash flows must equal the cost. The market value is always the PV of the future cash flows.
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