gr8wizard10
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How does duration play into Bond Valuation?

I understand a bond's value is derived by the sum of all expected future cashflow's discounted to PV using a discount rate which includes i/r expectations/risk premium/liquidity premium...

So a x year bond for instance:

PVb = Cfn/(1+i) + Cfn/(1+i)^n + ... + Cfn+Par/(1+i)^n

Where Cf is fixed cashflow (coupon payments)
(1+i) is the discount rate and n is the payment interval of that cashflow.

I understand that this takes the form of a geometric progression. So we can rewrite this as

[Cf/(1+i)]*(1-(1/(1+i)^n/1-(1/(1+i))+(Par/(1+i)^n)

where [x] is the common factor and n is the total number of payments. That should give the PV of this bond at a given discount rate, albeit I'm failing to understand where duration plays into it. If anyone could be of help, that would be great.
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gr8wizard10
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bump pls
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Acquiescence
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What do you mean where does duration come into it? You're not going to reference it at all in a simple bond PV.
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gr8wizard10
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(Original post by Acquiescence)
What do you mean where does duration come into it? You're not going to reference it at all in a simple bond PV.
Nvm, I've found the answer I was looking for. Thanks for the response.
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