Macaulay Duration
The weighted average time until a bond's cash flows are received, with each time weighted by the present value of its cash flow.
Formula
Macaulay Duration = Sum of (Time x Present Value of Cash Flow) / Bond Price
Unit
years
In depth
Macaulay duration is a time measure with a genuinely intuitive meaning: the average waiting period for the bond's money, weighted by how much arrives when. It is always less than maturity for a coupon-paying bond, because coupons arrive before the principal, and exactly equal to maturity for a zero-coupon bond. Its practical use is immunisation, where matching a portfolio's duration to a liability's horizon protects against rate moves. Modified duration, which measures price sensitivity, is derived directly from it.
Worked example
A five-year 8% bond yielding 9.23% has a Macaulay duration near 4.31 years — less than its five-year maturity, because four coupon payments arrive before the principal does.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Macaulay Duration” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.