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May 25, 2020 at 7:16 am
Macaulay Duration is the length of time taken by the investor to recover his invested money in the bond through coupons and principal repayment.
According to your explanation, it is an average time to get half the value.
Could you please clarify it? Thank you.
May 3, 2020 at 11:02 pm
This is very helpful. I am mastering the techniques.
February 23, 2020 at 10:36 am
I really do not understand, why you are saying that the project is delivering half of its value in 2.2 years. In my understanding it delivers all money invested including required return in 2.2 years.
John Moffat says
February 23, 2020 at 10:54 am
Its value is the benefit of the returns – not the initial investment.
Sarosh Awan says
May 18, 2019 at 12:00 pm
Dear Sir, If the steps to working out Macaulay Duration and project duration are same what is the main difference between the two.
May 18, 2019 at 4:37 pm
One is used to consider bonds, and the other is used as a way of appraising investments in new projects.
March 5, 2019 at 10:57 am
aditya13: You are allowed to take any calculator provided it does not display text at all.
However, given that it is your workings that are marked (rather than the final answer) it is much better to have a scientific calculator rather than a financial calculator.
March 5, 2019 at 10:37 am
Hello sir, All your lectures are very helpful and informative! I have a small doubt regarding the examination rules. Are we allowed to take an financial calculator in the exam as there are log and exponential calculations involved in few chapters?
September 20, 2018 at 3:53 pm
Hi John in eg 7….. The project duration
When calculating the NPV we ignore the initial investment? Cause I’m seeing 307,162 But I assumed we working a regular NPV and I subtracted the 240000 and ended up with 10 years duration which I thought to be long …..
September 20, 2018 at 5:01 pm
It is just as with the Macauley Duration. We divide by the PV of the future cash flows, not the NPV.
August 16, 2018 at 10:29 am
Dear John, Completely lost in this one. When I compare this to ACCA September/December 2016 Sample Answers, the question about Fernhurst, they calculate the project duration ar half of the value in 2.78 years by dividing the NPV of the project with multiplied proportions of the returns, eg (1×0.165)+(2×0.227)+(3×0.275)+(4×0.333) that gives the answer of 2.78 years. If I solve it using the technique in presentation I get 8.84 years, which seem unrealistic. Also there is no answer for Ex7 in course notes, and the course notes (pg. 53) state that the project duration “is a measure of the average time over which a project delivers it’s value”, other sources tell this is a measure of the time the project delivers half it’s value?
Which method is the correct one? Am I using the project duration where necessary or I should be using another technique?
August 16, 2018 at 11:59 am
Both techniques give the same result – I don’t know what went wrong in your calculation.
Think about it – multiply the PV’s by the years and then dividing the total by the NPV has to give the same as multiplying the PV/NPV but the years and then adding up.
Also, the two statements that you write in inverted commas are both saying the same thing 🙂
August 1, 2018 at 8:15 am
As I say in the lecture, the arithmetic is the same – the Macaulay duration applies to bonds, the project duration applies to projects!
August 2, 2018 at 12:11 am
Ok. Thank you
August 2, 2018 at 7:46 am
You are welcome 🙂
July 31, 2018 at 6:06 pm
So Please, what is the difference between the Macaulay duration and the Project Duration???
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