Suppose the duration D of a couponbearing coupon bond B at the current time t is defined
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Suppose the duration D of a couponbearing coupon bond B at the current time t is defined by
where c_{i},i = 1, 2, ··· ,n, is the ith coupon on the bond paid at time t_{i},F is the face value. Here, R is the yield to maturity on the bond, which is given by the solution to
Give a financial interpretation of duration.
Transcribed Image Text:
D(B, t) = Σci(ti  t)e¬R(ti−1) + (În − 1)Fe¬R(tn i=1 1)] / B.
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