ABSTRACT
Frederick Macaulay defined “duration” to be “… the essence of the time element in a loan.” 1 After rejecting several possible measures, he defined the duration of a bond to be https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315145976/456687ab-676c-42bf-8f02-685caedc8116/content/eqn6_1.tif"/>
where D = “duration”
N = periods to maturity
C = coupon paid at the end of each of the next N periods
F = face payment paid N periods hence
y = “yield to maturity” discount rate
