[Verse 1] When you buy a bond today, cash flows come your way Coupons every period, principal at end of day But when do you really get your money's worth back? Macaulay shows the timing, keeps your knowledge on track [Chorus] Weighted average time, that's what we're looking for Each cash flow has a weight, by present value's score Macaulay Duration, measures timing right Weighted average time, brings the concept to light [Verse 2] Take each coupon payment, discount to present day Multiply by time periods, that's the weighting way Add them all together, divide by bond's price Weighted average timing, calculated precise [Chorus] Weighted average time, that's what we're looking for Each cash flow has a weight, by present value's score Macaulay Duration, measures timing right Weighted average time, brings the concept to light [Bridge] Longer maturity means duration goes higher Lower coupon rates make the number climb higher Higher yields will pull the duration down It's the balance point where cash flows can be found [Verse 3] Think of it like balance, on a see-saw beam Each cash flow is a weight, at its time point it seems Where's the fulcrum point, where it balances out? That's Macaulay Duration, what it's all about [Chorus] Weighted average time, that's what we're looking for Each cash flow has a weight, by present value's score Macaulay Duration, measures timing right Weighted average time, brings the concept to light [Outro] When rates change your bond price, duration shows the way Weighted average timing, helps you plan your day Macaulay Duration, now you understand Weighted average time, in the palm of your hand
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