9755

Macaulay Duration

Macaulay duration is a weighted average of the time periods in which cash flows from a security are received. The weight attached to each period is the present value of the cash flow received in that period divided by the present value of the security. If the security pays a single cash flow at maturity, then the duration is equal to the maturity. Otherwise, the duration is less than maturity. The blue bars, controlled by the sliders, represent the raw cash flows, and the purple bars represent their present values. The duration shrinks as the bulk of the cash flows is shifted to the earlier periods.

SNAPSHOTS

  • [Snapshot]
  • [Snapshot]
  • [Snapshot]

DETAILS

Duration is associated with the slope of the price-yield curve. The absolute value of slope at any point on the price-yield curve is the Macaulay duration times the price of the security, divided by one plus the periodic yield. Modified duration is defined as the Macaulay duration divided by one plus the periodic yield; it used to approximate the percentage change in the price of a security associated with a small change in yield. Dollar duration is modified duration times the price.
    • Share:

Embed Interactive Demonstration New!

Just copy and paste this snippet of JavaScript code into your website or blog to put the live Demonstration on your site. More details »

Files require Wolfram CDF Player or Mathematica.









 
RELATED RESOURCES
Mathematica »
The #1 tool for creating Demonstrations
and anything technical.
Wolfram|Alpha »
Explore anything with the first
computational knowledge engine.
MathWorld »
The web's most extensive
mathematics resource.
Course Assistant Apps »
An app for every course—
right in the palm of your hand.
Wolfram Blog »
Read our views on math,
science, and technology.
Computable Document Format »
The format that makes Demonstrations
(and any information) easy to share and
interact with.
STEM Initiative »
Programs & resources for
educators, schools & students.
Computerbasedmath.org »
Join the initiative for modernizing
math education.
Step-by-step Solutions »
Walk through homework problems one step at a time, with hints to help along the way.
Wolfram Problem Generator »
Unlimited random practice problems and answers with built-in Step-by-step solutions. Practice online or make a printable study sheet.
Wolfram Language »
Knowledge-based programming for everyone.
Powered by Wolfram Mathematica © 2014 Wolfram Demonstrations Project & Contributors  |  Terms of Use  |  Privacy Policy  |  RSS Give us your feedback
Note: To run this Demonstration you need Mathematica 7+ or the free Mathematica Player 7EX
Download or upgrade to Mathematica Player 7EX
I already have Mathematica Player or Mathematica 7+