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THE RELATIONSHIP BETWEEN DURATION AND ECONOMIC DEPRECIATION: A NOTE
Author(s) -
Brief Richard P.
Publication year - 1984
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1984.tb00748.x
Subject(s) - depreciation (economics) , duration (music) , economics , consumption of fixed capital , asset (computer security) , liability , value (mathematics) , capital (architecture) , book value , financial economics , econometrics , monetary economics , actuarial science , accounting , human capital , mathematics , statistics , capital formation , financial capital , market economy , geography , art , literature , computer security , computer science , archaeology , earnings
This note derives an expression for duration in terms of the economic depreciation of a capital budgeting project or financial instrument. By showing how the decline in the value of an asset or liability influences duration, additional insight into the characteristics of this measure is obtained. The new formula shows that duration equals a standard value, which is adjusted for depreciation or appreciation.