Good day tutor,
Some past year paper answers define duration as to mean "the time it takes to recover half the repayments of interest and capital of a bond, in present value terms."
Why is it 'half'? I thought duration was meant to recover all the interest and capital repayments of a bond..
Ask the Tutor ACCA AFM
Duration
8y ago#1It is approximately half, but to prove it would take a lot of maths.
It certainly doesn't recover all of the interest and capital repayments - that would take the whole lifetime of the bond.
Do look at the chapter on this in the free lecture notes.
This topic is locked — no new replies.