Suppose the duration D of a coupon-bearing coupon bond B at the current time t is defined
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Suppose the duration D of a coupon-bearing coupon bond B at the current time t is defined by
![D(B, t) = ci(ti - t)e-R(ti1) + (n 1) FeR(tn i=1 -1)] / B.](https://dsd5zvtm8ll6.cloudfront.net/images/question_images/1700/5/7/4/296655cb4584afc41700574293390.jpg)
where ci,i = 1, 2, ··· ,n, is the ith coupon on the bond paid at time ti,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.
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