question archive What is the modified duration of a perpetuity with payments of 4 at the end of each year if the annual rate of interest is 4%?
What is the modified duration of a perpetuity with payments of 4 at the end of each year if the annual rate of interest is 4%?
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What is the modified duration of a perpetuity with payments of 4 at the end of each year if the annual rate of interest is 4%?
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The duration of level perpetuity is given by;
(1 + y) / y.
where y=4/100 or 0.04
Duration level of perpetuity=(1+ 0.04)/0.04
=26 years
Therefore the Duration level of perpetuity is 26 years
