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Hi,
I’m slightly confused with Maculay/Project duration. While for bond we calculate with all CF (weighted discounted coupon and redemption value)/Market price, I’m not sure I fully get the logic for project duration. Why do we consider only PV (Returns) and not NPV (including Investment)?
thank you in advance and kind regards
OscarHave you watched my free lectures on this, because I do explain in the lectures 🙂
I have watched them again and it’s really clear by the way you explain them. Anyhow I still have a doubt on project duration – why don’t we consider the investment part? I guess I get confused because sometime project duration is named as average time to recover the investment but actually it’s just average time to get the cash inflows (and hence give a measure of exposure to risk), right? I shouldn’t really look at the investment part, right?
Then modified project duration just gives a sensitivity analysis of exposure to discount rate chosen, right?
thank you very much in advance and also for your lectures, they are really great.
Oscar
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