Bond prices and interest rates have an inverse relationship. Modified duration helps investors understand this relationship by measuring the sensitivity of a bond's price to changes in interest rates.

What Is Bond Duration? Definition, Formula & Examples. ... the main takeaway is that bond duration predicts how sharply the market price of a bond will change as a result of changes in interest rates.

Modified duration measures price sensitivity to interest rate changes. The calculation for modified duration is relatively straightforward. Modified duration is important for investors in ...

The bond's price will fluctuate depending on supply and demand, changes in interest rates and any downgrade of the issuer that could impact its ability to honor the terms of the bond.

I have a report that prices bonds in the old tick format (i.e 101-10 for 101 and 10/32nds). When in that format, the following formula works great and provides the correct price: ...

The general formula for the rate of change is ROC = (X1-X2)/(T1-T2), where (X1-X2) is the change in variable being measured and (T1-T2) is the amount of time it took for the change to happen. This ...

If the bonds trade publicly, the price may fluctuate over the bond’s lifetime. On the other hand, savings bonds such as the Series I bond do not trade publicly, so their price does not change.

Yet, as interest rates in the broader bond market change, bond prices can rise or fall dramatically from their par value, and that makes calculating yields trickier. Image source: Getty Images.