FMRR and Duration: Implications for Real Estate Investment Analysis

THE FMRR IS A MODIFIED TERMINAL VALUE RATE OF RETURN CONCEPT. DURATION IS AN AVERAGE INVESTMENT LIFE CONCEPT. DURATION IS INTRODUCED AS A USEFUL ANALYTICAL ALTERNATIVE TO MATURITY IN INVESTMENT ANALYSIS. SOME OF THE RELATIONSHIPS BETWEEN DURATION AND THE FMRR ARE POINTED OUT. THE FMRR IS SIMPLY A DURATION WEIGHTED AVERAGE OF THE IRR'S. PROJECT LINES WERE INTRODUCED AND THEIR RELATIONSHIP TO NPV PROFILES WAS SHOWN. PROJECTILE LINES COULD BE EMPLOYED TO PARTITION GRAPHICALLY THE RISK OF CASH THROW OFFS FROM THE RISK OF RE INVESTMENT RATES. IT IS INDICATED THAT THE KNOWLEDGE OF THE CORRELATION OF THESE RISK COMPONENTS COULD BE EMPLOYED TO FURTHER BOUND THE UNCERTAINTY OF THE FMRR OF A PROJECT IN A PORTFOLIO CONTEXT. GRAPHS. TABLES. EQUATIONS.