Macaulay Duration
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.