If a perpetuity that pays 10 once a year, what is its Macaulay duration? Assume a 5% yield:
A. 22
B. 200
C. 210
D. 21
Please explain your answer.
Annual Payment = $10
Annual yield = i = 5% or 0.05
Macaulay Duration = (1+i)/i = (1+0.05)/0.05 = 21
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