A perpetuity (a bond with an infinite life) has a finite duration because after a certain point (depending on the interest rate), cash flows are so heavily discounted that they no longer affect the average.

Question

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The duration of a perpetuity is finite because the present value of future cash flows decreases exponentially with time due to discounting, making distant cash flows negligible in their impact on the average.

A Perpetuity (A Bond with an Infinite Life) Has a Finite