Macaulay duration calculator

Macaulay duration calculator calculator can be used to determine the weighted average time until cash flows from a bond are received. It helps in understanding the sensitivity of a bond's price to changes in interest rates.

Input Parameters

Calculation Results

Macaulay Duration

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Where:
Macaulay Duration = Σ(t * CFt / PV) / MV
t = time period
CFt = cash flow at time t
PV = present value of cash flow
MV = modified duration

Macaulay duration calculator Calculator Usage Guide

Learn how to use the Macaulay duration calculator calculator and its working principles

How to Use the Calculator

  1. Enter the cash flows for each period in the "Cash Flows" field, separated by commas. For example, "100,200,300" represents cash flows of $100, $200, and $300.
  2. Enter the corresponding dates (in years) for each cash flow in the "Dates" field, separated by commas. For example, "1,2,3" represents cash flows received in 1, 2, and 3 years.
  3. Enter the yield to maturity (YTM) as a percentage in the "Yield to Maturity" field. For example, enter "5.5" for a 5.5% yield.
  4. Click the "Calculate" button to compute the Macaulay duration.

Understanding Macaulay Duration

Macaulay duration is a measure of the sensitivity of the price of a bond to changes in interest rates. It represents the weighted average time until cash flows from a bond are received, with the weights being the present value of each cash flow.

Formula

Macaulay Duration = Σ(t * CFt / PV) / MV

Where:

  • t = time period
  • CFt = cash flow at time t
  • PV = present value of cash flow
  • MV = modified duration

Practical Applications

Macaulay duration is useful for comparing the duration of different bonds. A bond with a higher Macaulay duration will have its price more sensitive to interest rate changes. This measure helps investors understand the time value of their investment and make informed decisions.