Macaulay Duration as the Balancing Point of a Seesaw
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Macaulay's duration is a weighted average of the time until the cash flows are received, where the weights are the present value of the cash flows as a percentage of the security's price. This visualization helps students to understand why increasing the yield and/or coupon rate decreases the duration, while increasing the term to maturity increases the duration (and vice-versa). Imagine a seesaw with several (one for each cash flow) buckets that are the height of the nominal cash flows. The buckets are filled with water to a level that represents the present value of the cash flows. Duration is the location of the fulcrum that results in a balanced seesaw.
Contributed by: Timothy R. Mayes (January 2012)
Open content licensed under CC BY-NC-SA
The author has found this visualization technique to be useful in teaching the concept of duration. It was inspired by .
 R.W. Kopprasch, "Understanding Duration and Volatility," The Handbook of Fixed Income Securities (F. J. Fabozzi and I. M. Pollack, eds.), Homewood, IL: Dow Jones–Irwin, 1987 pp. 86–120.
"Macaulay Duration as the Balancing Point of a Seesaw"
Wolfram Demonstrations Project
Published: January 16 2012