Eurobonds pay coupons annually. Suppose a Eurobond matures in 6 years, the annual coupon is 8 percent, the face value of the bond is $1,000, and the current yield to maturity ( R) is also 8 percent. We show the calculation of its duration in Table 9–2 . Column 1 lists the time period (in years) in which a cash flow ( CF) is received. Column 2 lists the CF received in time period t. Column 3 lists the discount factor used to convert a future value to a present value. Column 4 is the present value of the CF received in each period t (Column 2 times Column 3). The sum of Column 4 is the present value of the bond: the denominator of the duration equation. Column 5 is the present value of the CF received each period times the time it takes to receive the CF (Column 4 times Column 1). The sum of Column 5 is the time weighted present value of the bond: the numerator of the duration equation. As the calculation indicates, the duration or weighted-average time to maturity on this bond is 4.993 years

Table 9–2