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 ...

In Excel, the formula used to calculate a bond's modified duration is built into the MDURATION function. This function returns the modified Macaulay duration for a security, assuming the par value ...

In the bond market, convexity refers to the relationship between price and yield. When graphed, this relationship is non-linear and forms a long-sloping U-shaped curve.

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: ...

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.

In simple terms, a bond’s duration can help investors estimate how much a bond’s—or portfolio of bonds—price will be affected by a change in long-term yields. Bond funds with longer ...

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.