Calculate Modified Duration
A formula that expresses the measurable change in the value of a security in response to a change in interest rates.
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Interpretation:
The duration of a bond with a par value of $#PValue#, a coupon of #ARate#%, and a maturity on #MDate# will increase to #Duration# with a 1% or 100 basis point increase in interest rates. " >What does this mean to you? Modified duration provides a good indication of a bond's sensitivity to a change in interest rates. The more your duration changes with a 1% increase in interest rates, the more volatility your bond will exhibit. The bonds with lower coupons and longer maturities tend to have greater price volatility than bonds with higher coupon rates and shorter maturities.
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- Understanding the Time Value of Money - Find out how time really is money by learning to calculate present and future value.
- Advanced Bond Concepts - This detailed tutorial explains some of the more complex concepts and calculations you need to know for trading bonds, including bond pricing, yield, term structure of interest rates, duration, and much more.