Proof the Following Three Propositions Using a Simple Numerical Example

question 28

Essay

Proof the following three propositions using a simple numerical example for each of the cases.
a. The duration of an asset or liability with intervening cash flows between issue and maturity is smaller than its maturity.
b. The duration of an asset or liability without any intervening cash flows between issue and maturity equals its maturity.
c. Despite the fact that perpetuities such as consol bonds have no maturity, it is possible to calculate their duration.

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Definitions:

Time Constraint

A limitation or deadline in a project or task that dictates the time by which objectives must be achieved.

Sintering Department

A division within a manufacturing facility where sintering, a process that fuses particles together by heating them without melting, is performed.

Inequality/Equality

Concepts referring to the state or quality of being unequal or equal, respectively; often used in contexts ranging from mathematics to social sciences.

Production Rates

The speed at which goods are manufactured or produced within a specified timeframe.