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Hi everyone,
My question relates to Modified duration and the interpretation of its result. Taken from a Kaplan example the Macaulay’s duration solution was 1.94 years where cash flows were discounted at 8%. Hence the modified duration was 1.94/1.08 giving 1.80 years.
What does this mean especially in contrast to Macaulay’s duration? And what is its importance to investment appraisal?
Thanks.
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