How does this differ from the macaulay duration

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1. You will receive cash flows of $70 next year from a perpetuity. The perpetuity is indexed to inflation, π=2.0%, such that payments grow at 0.4% faster than inflation, for a 2.4% total rate. If the interest rate is 10.0% per year, what is the PV of the perpetuity?

2. A 10-year bond costs $1,000 today, paying $100 semiannual coupons, and returning $1,000 in addition to the final coupon at the end of year 10. If the yield curve is a flat 0%, what is the plain duration of this bond, and how does this differ from the Macaulay duration? Report as your answer the average of the two durations.

Reference no: EM131964210

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