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The method uses an iterative process for solving the equation. The process is started by estimating a discounting value v0. A better estimate v1 is then given by:

This process is then repeated as often as necessary. i.e.

until the change in v from one iteration to the next is within the required accuracy. Assuming that i = m when this is achieved, the required redemption yield y compounded annually is given by:

or Similarly the duration D is:

An initial approximation which is reasonable in most circumstances is:

Where:

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05/05/2010 00:20