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Investments
Duration in one page
Tanvir H. · Peer mentor · 2026-10-05
Macaulay duration is the weighted wait; modified duration is the slope; convexity is the curvature. For a 6% ten-year bond the three numbers are 7.80, 7.36 and 69.74. The exam trick: rise in yield costs slightly less than duration says, fall in yield gains slightly more.
One: using unit contribution for a target-profit question but forgetting fixed costs. Two: mixing revenue-based margin with unit margin. Three: assuming the mix stays constant when the product set changes. Write the formula before touching the numbers.
Rank by NPV, then report IRR as context. If the two conflict, the scale difference is the reason. I keep a one-line note in the case file explaining which measure drove the decision so the reasoning survives a review.
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I understand that IRR is the rate where NPV is zero, but our case study had two projects where the higher IRR also had the lower NPV. Which should the business choose?
Use NPV when the projects differ in scale or timing. IRR is a rate, so it ignores how much value is created. NPV answers the decision question directly.
Study group BStudy group · 2026-10-05
We added a step to our notes: compare NPV first, then use IRR as a cross-check. It stopped us over-relying on the percentage.
Our cafe case offers a student discount. Does that mean we should run two separate break-even calculations?