The duration of a perpetuity with a yield of 8% is
A) 13.50 years.
B) 12.11 years.
C) 6.66 years.
D) Cannot be determined

Name: The duration of a perpetuity with a yield of 8% is A) 13.50 years. B) 12.11 years. C) 6.66 years. D) Cannot be determined
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Question

Quizplus · Accepted Answer

The duration of a perpetuity is the present value of all future cash flows divided by the current price. In this case, the yield is 8%, so the present value of all future cash flows is 1/0.08 = 12.5 years. The duration is then 12.5 years.

The Duration of a Perpetuity with a Yield of 8